<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-18429
---------------------
THE LOEWEN GROUP INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C>
BRITISH COLUMBIA, CANADA 98-0121376
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
4126 NORLAND AVENUE
BURNABY, BRITISH COLUMBIA V5G 3S8
(Address of principal executive offices) (zip code)
604-299-9321
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Indicate by check x whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
---------------------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check x whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes / / No / /
---------------------
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of outstanding Common shares as of August 9, 1996 was
58,933,380.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE LOEWEN GROUP INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS
as of June 30, 1996 and December 31, 1995............................. 1
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED
EARNINGS for the Three Months Ended June 30, 1996 and 1995
and the Six Months Ended June 30, 1996 and 1995....................... 2
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
for the Six Months Ended June 30, 1996 and 1995....................... 3
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS........................... 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................. 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................ 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 22
ITEM 5. OTHER INFORMATION................................................ 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................. 24
SIGNATURES.............................................................................. 29
</TABLE>
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS.
THE LOEWEN GROUP INC.
CONSOLIDATED BALANCE SHEETS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and term deposits........................................... $ 36,521 $ 39,454
Receivables, net of allowances................................... 158,346 115,953
Inventories...................................................... 30,927 27,489
Prepaid expenses................................................. 10,611 8,185
----------- ----------
236,405 191,081
Prearranged funeral services....................................... 257,487 245,854
Long-term receivables, net of allowances........................... 209,944 167,367
Investments........................................................ 112,783 86,815
Insurance invested assets.......................................... 286,587 97,024
Cemetery property, at cost......................................... 493,023 369,022
Property and equipment............................................. 635,972 551,965
Names and reputations.............................................. 521,248 424,944
Deferred income taxes.............................................. 56,715 61,959
Other assets....................................................... 109,475 66,949
----------- ----------
$ 2,919,639 $2,262,980
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current indebtedness............................................. $ -- $ 38,546
Accrued settlements.............................................. -- 53,000
Accounts payable and accrued liabilities......................... 94,151 80,058
Long-term debt, current portion.................................. 68,041 69,671
----------- ----------
162,192 241,275
Long-term debt..................................................... 1,027,334 864,838
Other liabilities.................................................. 159,751 136,433
Insurance policy liabilities....................................... 211,907 84,898
Deferred prearranged funeral services revenue...................... 257,487 245,854
Preferred securities of subsidiary................................. 75,000 75,000
Shareholders' equity
Share capital.................................................... 790,451 490,055
Share capital issuable under legal settlements................... -- 72,000
Preferred shares................................................. 157,146 --
Retained earnings................................................ 62,497 36,439
Foreign exchange adjustment...................................... 15,874 16,188
----------- ----------
1,025,968 614,682
----------- ----------
$ 2,919,639 $2,262,980
=========== ==========
Commitments and contingencies (Notes 6, 7 and 8)
</TABLE>
See accompanying notes to interim consolidated financial statements.
-1-
<PAGE> 4
THE LOEWEN GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue
Funeral....................................... $133,713 $104,770 $266,972 $211,662
Cemetery...................................... 67,882 33,479 121,206 56,646
Insurance..................................... 21,561 -- 28,062 --
-------- -------- -------- --------
223,156 138,249 416,240 268,308
Costs and expenses
Funeral....................................... 80,203 61,454 157,427 121,231
Cemetery...................................... 45,799 23,989 82,741 40,649
Insurance..................................... 16,600 -- 21,975 --
-------- -------- -------- --------
142,602 85,443 262,143 161,880
-------- -------- -------- --------
80,554 52,806 154,097 106,428
Expenses
General and administrative.................... 17,179 12,131 33,859 22,637
Depreciation and amortization................. 13,060 9,090 24,702 17,486
-------- -------- -------- --------
30,239 21,221 58,561 40,123
-------- -------- -------- --------
Earnings from operations........................ 50,315 31,585 95,536 66,305
Interest on long-term debt.................... 21,058 12,581 39,546 23,942
-------- -------- -------- --------
Earnings before dividends on preferred
securities of subsidiary and income taxes..... 29,257 19,004 55,990 42,363
Dividends on preferred securities of
subsidiary.................................... 1,772 1,772 3,544 3,544
-------- -------- -------- --------
Earnings before income taxes.................... 27,485 17,232 52,446 38,819
Income taxes
Current....................................... 1,553 3,351 3,721 10,541
Deferred...................................... 6,443 1,541 12,013 1,881
-------- -------- -------- --------
7,996 4,892 15,734 12,422
-------- -------- -------- --------
Net earnings for the period..................... $ 19,489 $ 12,340 $ 36,712 $ 26,397
Retained earnings, beginning of period.......... 51,163 129,549 36,439 115,492
Common share dividends.......................... (4,132) (2,369) (6,631) (2,369)
Preferred share dividends....................... (4,023) -- (4,023) --
-------- -------- -------- --------
Retained earnings, end of period................ $ 62,497 $139,520 $ 62,497 $139,520
======== ======== ======== ========
Basic earnings per share........................ $ 0.30 $ 0.28 $ 0.60 $ 0.62
Fully diluted earnings per share................ $ 0.30 $ 0.28 $ 0.60 $ 0.62
Dividend per Common share....................... $ 0.07 $ 0.05 $ 0.12 $ 0.05
</TABLE>
See accompanying notes to interim consolidated financial statements.
-2-
<PAGE> 5
THE LOEWEN GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
EXPRESSED IN THOUSANDS OF U.S. DOLLARS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1996 1995
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH PROVIDED BY (APPLIED TO)
Operations
Net earnings....................................................... $ 36,712 $ 26,397
Items not affecting cash
Depreciation and amortization................................... 24,702 17,486
Deferred income taxes........................................... 12,013 1,881
Other........................................................... 10,287 4,022
Share capital and debt issuable under legal settlements............ (112,000) --
Net changes in other non-cash balances............................. (122,934) (21,646)
--------- ---------
(151,220) 28,140
--------- ---------
Investments
Business acquisitions.............................................. (361,748) (178,172)
Construction of new facilities..................................... (9,748) (5,243)
Investments, net................................................... (22,147) (44,088)
Purchase of property and equipment................................. (15,168) (9,128)
Proceeds on disposition of assets.................................. 2,428 2,150
Other.............................................................. (6,737) (16,273)
--------- ---------
(413,120) (250,754)
--------- ---------
Financing
Issue of share capital, before income tax recovery................. 295,773 190,125
Issue of preferred shares, before income tax recovery.............. 154,094 --
Increases in long-term debt........................................ 627,428 13,807
Repayments of long-term debt....................................... (448,308) (5,048)
Common share dividends............................................. (6,631) (2,369)
Preferred share dividends.......................................... (4,023) --
Current note payable............................................... (38,546) --
Other.............................................................. (17,982) 32,055
--------- ---------
561,805 228,570
--------- ---------
Increase (decrease) in cash and cash equivalents during the period... (2,535) 5,956
Effect of foreign exchange adjustment................................ (398) (134)
Cash and cash equivalents, beginning of period....................... 39,454 11,649
--------- ---------
Cash and cash equivalents, end of period............................. $ 36,521 $ 17,471
========= =========
Cash and cash equivalents include
Cash and term deposits............................................. $ 36,521 $ 21,971
Bank indebtedness, included in current indebtedness................ -- (4,500)
--------- ---------
$ 36,521 $ 17,471
========= =========
</TABLE>
See accompanying notes to interim consolidated financial statements.
-3-
<PAGE> 6
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
NOTE 1. BASIS OF PRESENTATION
The United States dollar is the principal currency of the Company's
business and accordingly the consolidated financial statements are expressed in
United States dollars. The financial statements have been prepared in accordance
with accounting principles generally accepted in Canada.
The interim consolidated financial statements (unaudited) include the
accounts of all subsidiary companies and in management's opinion include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the financial results for the interim periods. The
financial statements have been prepared consistent with the accounting policies
described in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission for the year ended December 31, 1995 and should be read
in conjunction therewith. Certain of the comparative figures have been
reclassified to conform to the presentation adopted in the current period.
NOTE 2. ACQUISITIONS
During the six months ended June 30, 1996, the Company acquired 78 funeral
homes, 57 cemeteries and two insurance companies in the United States, and five
funeral homes and one cemetery in Canada, for a total consideration of
$361,748,000. Included in these acquisitions is the purchase of certain net
assets of S.I. Acquisition Associates L.P. ("S.I.") of Donaldsonville,
Louisiana, for total consideration of approximately $145,000,000. S.I.
concurrently acquired all the outstanding shares of Ourso Investment
Corporation. The assets include 15 funeral homes, two cemeteries and two
insurance companies.
During the six months ended June 30, 1995, the Company acquired 75 funeral
homes and 37 cemeteries in the United States and six funeral homes and two
cemeteries in Canada.
All of the Company's acquisitions have been accounted for by the purchase
method. The preliminary purchase price allocation for certain of these
acquisitions has been estimated based on available information at the time and
is subject to revision. The effect of acquisitions at dates of purchase on the
consolidated balance sheet is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1996 1995
--------- --------
<S> <C> <C>
Current assets................................................ $ 21,756 $ 7,580
Prearranged funeral services.................................. 14,668 17,743
Long-term receivables, net of allowances...................... 20,762 28,920
Investments................................................... -- 10,129
Insurance invested assets..................................... 185,971 --
Cemetery property, at cost.................................... 129,389 103,963
Property and equipment........................................ 71,801 34,907
Names and reputations......................................... 104,318 33,538
Other assets.................................................. 599 475
--------- --------
549,264 237,255
Current liabilities........................................... (6,854) (4,366)
Long-term debt................................................ (18,207) (7,070)
Other liabilities............................................. (23,200) (22,547)
Insurance policy liabilities.................................. (125,207) --
Deferred income taxes......................................... 620 (7,357)
Deferred prearranged funeral services revenue................. (14,668) (17,743)
--------- --------
$ 361,748 $178,172
========= ========
</TABLE>
-4-
<PAGE> 7
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1996 1995
--------- --------
<S> <C> <C>
Consideration
Cash, including assumed debt repaid at closing.............. $ 335,501 $173,248
Debt........................................................ 17,481 4,924
Share capital............................................... 8,766 --
--------- --------
$ 361,748 $178,172
========= ========
</TABLE>
Insurance invested assets consist primarily of fixed maturities including
collateralized mortgage obligations of approximately $111,700,000 and
mortgage-backed securities of approximately $9,200,000 as part of the life
insurance portfolio of SI.
The following table reflects, on an unaudited pro-forma basis, the combined
results of the Company's operations acquired during the period ended June 30,
1996 as if all such acquisitions had taken place at the beginning of the
respective periods presented. Appropriate adjustments have been made to reflect
the accounting basis used in recording these acquisitions. This pro-forma
information does not purport to be indicative of the results of operations that
would have resulted had the acquisitions been in effect for the entire periods
presented, and is not intended to be a projection of future results or trends.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Revenues....................................................... $451,860 $347,365
Net earnings................................................... $ 35,420 $ 26,802
Basic earnings per share....................................... $ 0.56 $ 0.52
Fully diluted earnings per share............................... $ 0.56 $ 0.52
</TABLE>
NOTE 3. PREFERRED SECURITIES OF SUBSIDIARY
On August 15, 1994, 3,000,000 9.45% Cumulative Monthly Income Preferred
Securities, Series A (MIPS) were issued by Loewen Group Capital, L.P. (LGC) in a
public offering for an aggregate amount of U.S. $75,000,000. LGC is a limited
partnership and Loewen Group International, Inc. (LGII) as its general partner
manages its business and affairs. LGII serves as the holding company for United
States assets and operations of the Company. The consolidated financial
statements of LGII are prepared in accordance with Canadian generally accepted
accounting principles and are presented in United States dollars.
Summarized financial data for LGII are presented as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income statement information
Total revenue......................... $206,113 $123,340 $382,170 $238,793
Gross profit.......................... 74,097 46,253 140,682 93,270
Earnings from operations.............. 46,877 28,575 88,232 59,978
Net earnings.......................... 5,447 3,804 10,912 11,546
</TABLE>
-5-
<PAGE> 8
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---------- ------------
<S> <C> <C>
Balance sheet information
Current assets........................................... $ 223,270 $ 184,289
Non-current assets....................................... 2,368,445 1,776,425
---------- ----------
Total assets............................................. 2,591,715 1,960,714
Current liabilities...................................... 135,256 221,555
Non-current liabilities.................................. 2,228,557 1,696,709
---------- ----------
Total liabilities........................................ $2,363,813 $1,918,264
Shareholders' equity..................................... 227,902 42,450
</TABLE>
NOTE 4. EQUITY FINANCING
In January 1996, the Company completed a public offering in Canada and a
simultaneous private placement in the United States of 8,800,000 Convertible
First Preferred Shares Series C Receipts for gross proceeds of $220,000,000
Canadian (U.S.$161,000,000). The gross proceeds were deposited with an escrow
agent. As of June 30, 1996, 8,800,000 Series C Preferred shares had been
deposited with the escrow agent and all of the net proceeds had been released to
the Company.
In March 1996, the Company completed a public offering in Canada and a
simultaneous private placement in the United States of 7,000,000 Common shares
for aggregate gross proceeds of $275,000,000 Canadian (U.S.$201,000,000).
In April 1996, the underwriters of the above offering exercised an option
to purchase an additional 700,000 Common shares from the Company. The net
proceeds of approximately $27,000,000 Canadian (U.S.$20,000,000) from the
exercise of the option were used for working capital and other corporate
purposes, including acquisitions.
NOTE 5. LONG-TERM DEBT
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---------- ------------
<S> <C> <C>
Bank revolving credit agreements................................... $ 181,616 $379,488
Bank term loan agreements.......................................... 141,672 141,666
9.70% Series A and C senior amortizing notes due in 1998........... 93,750 93,750
9.93% Series B senior amortizing notes due in 2001................. 42,850 42,850
9.62% Series D senior amortizing notes due in 2003................. 60,000 60,000
6.49% Series E senior amortizing notes due in 2004................. 50,000 50,000
7.50% Senior notes due in 2001..................................... 225,000 --
8.25% Senior notes due in 2003..................................... 125,000 --
Present value of notes issued under legal settlements.............. 41,264 40,000
Contingent consideration payable on acquisitions................... 27,839 35,260
Other, principally arising from vendor financing of acquired
operations or long-term debt assumed on acquisitions............. 106,384 91,495
---------- --------
$1,095,375 $934,509
Less current portion............................................... 68,041 69,671
---------- --------
$1,027,334 $864,838
========== ========
</TABLE>
In March 1996, LGII consummated a private placement of 1996 Notes in the
United States for gross proceeds of $350,000,000. In conjunction with the
placement of the 1996 Notes, the Company closed out an
-6-
<PAGE> 9
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
anticipatory hedge resulting in a gain of $2,821,000 which will be amortized as
a reduction of interest expense over the life of the 1996 Notes.
The Company's primary revolving credit agreement was entered into on May
31, 1996 by LGII and provides for borrowings of up to $750,000,000 with a
maturity of May 29, 2001. Initial borrowings under this facility were used to
repay in full and retire a previous $400,000,000 revolving credit facility. At
June 30, 1996, $162,000,000 was outstanding under the Company's primary
revolving credit agreement.
On May 31, 1996, the Company, LGII and their senior lenders entered into a
collateral trust arrangement whereby senior lenders would share certain
collateral on a pari passu basis. This collateral is held by a trustee for the
equal and ratable benefit of the various holders of senior indebtedness. This
group consists of lenders under bank revolving credit agreements, the bank term
loans, and the senior notes. At June 30, 1996, the indebtedness owed to the
senior lenders aggregated $919,888,000.
The collateral includes (i) a pledge for the benefit of the senior lenders
of the shares held by the Company of substantially all of the subsidiaries in
which the Company directly or indirectly holds more than a 50% voting or
economic interest and (ii) all of the financial assets of LGII (LGII does not
have material assets other than financial assets).
The above credit facilities and loan agreements contain various restrictive
provisions, including provisions restricting payment of dividends on Common and
Preferred shares, limiting redemption or repurchase of shares, limiting
disposition of assets, limiting the amount of additional debt, limiting the
amount of capital expenditures and maintaining specified financial ratios.
NOTE 6. LEGAL PROCEEDINGS AND CONTINGENCIES
Class Action Lawsuits
On November 4, 1995, a class action lawsuit claiming violations of Federal
securities laws was filed on behalf of a class of purchasers of Company
securities against TLGI and five officers (four of whom are directors) in the
United States District Court for the Eastern District of Pennsylvania. LGII,
Loewen Group Capital, L.P. ("LGCLP") and the lead underwriters ("Underwriters")
of the 1994 offering of Monthly Income Preferred Securities by LGII and LGCLP
were subsequently added as defendants. On November 7, 1995, a class action
lawsuit was filed on behalf of a class of purchasers of Common Shares against
TLGI and the same individual defendants in the United States District Court for
the Southern District of Mississippi alleging Federal securities law violations
and related common law claims. On December 1, 1995, a class action lawsuit was
filed on behalf of a class of purchasers of the Company's securities against
TLGI, LGII, LGCLP and the same individual defendants in the United States
District Court for the Eastern District of Pennsylvania.
Each of the three class actions (collectively, the "Class Actions") alleges
that the defendants failed to disclose the Company's anticipated liability in
connection with certain litigation with J.J. O'Keefe, Sr., Gulf National
Insurance Company and certain affiliates (collectively, "Gulf National"). The
Pennsylvania Class Actions also allege failure to disclose the potential
liability in connection with certain litigation with Provident American
Corporation and a subsidiary (together, "Provident"). The Company settled the
lawsuits with Gulf National and Provident during the first quarter of 1996.
In each of the Class Actions, the plaintiffs seek compensatory money
damages in an unspecified amount, together with attorneys fees, expert fees and
other costs and disbursements. In addition, the Mississippi Class Action seeks
unspecified punitive damages. The longest class period specified is from April
16, 1993 to November 1, 1995. Pursuant to a Transfer Order filed April 15, 1996
by the Judicial Panel on Multidistrict Litigation, the Mississippi Class Action
was transferred to the Eastern District of Pennsylvania for consolidation of
pretrial proceedings with the two Pennsylvania Class Actions. The plaintiffs are
expected to
-7-
<PAGE> 10
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
file a consolidated amended complaint on or before August 26, 1996. LGII and
Loewen expect that the claims in the consolidated complaint will not differ
substantially from the claims in each of the Class Actions.
On June 11, 1996 all claims against the Underwriters were dismissed without
prejudice, by agreement of the parties. Prior to the dismissal, the Underwriters
had indicated to the Company that they would seek indemnity from the Company for
costs incurred. The Company has agreed to pay the Underwriters costs through the
date of dismissal. The Company expects that the Underwriters will seek further
indemnity from the Company if any of the claims against the Underwriters are
reinstated.
The Company referred the claims to its insurance carrier under its
directors and officers insurance policy. On February 9, 1996 the carrier denied
coverage of the claim. The Company believes that such denial was improper. On
March 21, 1996, the Company commenced an action in British Columbia Supreme
Court seeking a declaration that the policy covers indemnification with respect
to the Class Actions. As the date hereof, the Supreme Court had not ruled on the
action. The Company cannot predict at this time the extent to which any
settlement or litigation that may result from these claims will ultimately be
covered by insurance, if at all.
The Company has determined that it is not possible to predict the final
outcome of these legal proceedings and that it is not possible to establish a
reasonable estimate of possible damages, if any, or reasonably to estimate the
range of possible damages that may be awarded to the plaintiffs. Accordingly, no
provision has been made in the Company's financial statements.
Roe, et al., Palladino et al., O'Sullivan and Schneider
In October 1995, Roe and 22 other families filed a lawsuit against LGII and
Osiris Holding Corporation in Florida Circuit Court in St. Petersburg. In early
April 1996, a related lawsuit, Palladino et al., was filed by eight families
against LGII and Osiris in Florida Circuit Court in St. Petersburg, and was
assigned to the same judge handling the Roe matter. In June 1996, the Roe and
Palladino lawsuits were consolidated and amended to include a total of 90
families (the "Consolidated Complaint") and in July 1996, the Palladino lawsuit
was dismissed. The gravamen of the Consolidated Complaint is that in July 1992,
employees of the Royal Palm Cemetery facility who were installing a sprinkler
line disturbed the remains of infants in one section of the cemetery. The
Consolidated complaint also names TLGI as a defendant (on an alter ego theory)
and includes claims for negligent retention of certain cemetery employees. Each
plaintiff identified in the Consolidated Complaint is seeking damages in excess
of $15,000, but the Consolidated Complaint alleges aggregate damages in excess
of $40 million. In addition, in May 1996, Sean M. O'Sullivan filed a lawsuit
against Osiris and LGII and in July 1996, Karen Schneider filed a lawsuit
against Osiris and LGII. The factual allegations underlying the O'Sullivan and
Schneider complaints are identical to those alleged in the Consolidated
Complaint.
At the time the remains allegedly were disturbed, the Royal Palm Cemetery
was owned by Osiris. Osiris was acquired by the Company in March 1995. The
insurance carrier for Osiris has assumed the defense of these claims, subject to
a reservation of rights. The policy limit is $11,000,000. No provision with
respect to these lawsuits has been made in the Company's financial statements.
Rojas et al.
On February 22, 1995, Juan Rivera Rojas, Leyda Rivera Vega, the Conjugal
Partnership constituted between them, and Carlos Rivera Bustamente instituted a
legal action against the Company, LGII and a subsidiary in the United States
District Court for the District of Puerto Rico. The complaint alleges that the
defendants breached a contract and ancillary agreements with the plaintiffs
relating to the purchase of funeral homes and cemeteries, and committed related
torts. The plaintiffs seek compensatory damages of $12,500,000, and unspecified
punitive damages (although the Company is advised by counsel that there is no
-8-
<PAGE> 11
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
entitlement to punitive damages under Puerto Rican law). The Company has filed a
motion to dismiss the complaint on the grounds of failure to join an
indispensable party. In addition, the Company claims it has suffered damages far
in excess of the amount claimed by the plaintiffs as a result of breach of
contract and related torts on the part of the plaintiffs. A subsidiary of the
Company has filed a complaint seeking damages in excess of $19,000,000 from the
plaintiffs in the General Court of Justice of the Commonwealth of Puerto Rico.
The Company has determined that it is not possible to predict the final outcome
of these legal proceedings and that it is not possible to establish a reasonable
estimate of possible damages, if any, or reasonably to estimate the range of
possible damages that may be awarded to the plaintiffs. Accordingly, no
provision has been made in the Company's financial statements.
Esner Estate
On February 1, 1995, Stuart B. Esner and Sandra Esner (the "Executors") as
co-executors for the Estate of Gerald F. Esner (the "Esner Estate") filed an
action in the Court of Common Pleas in Bucks County, Pennsylvania against Osiris
and a law firm that previously represented Osiris and its principal
shareholders, Gerald F. Esner, Lawrence Miller and William R. Shane. Messrs.
Miller and Shane currently are executive officers of TLGI and LGII. The
complaint alleged that Osiris breached the terms of a Second Amended and
Restated Shareholders' Agreement among Messrs. Esner, Miller and Shane (the
"Shareholders' Agreement") by attempting to repurchase shares of Osiris held by
the Esner Estate (the "Esner Shares") without complying with the terms of the
Shareholders' Agreement, and that the law firm breached its fiduciary duty and
committed malpractice in connection with the drafting of the Shareholders'
Agreement and its representation of Esner and Osiris. The Executors asked the
Court (i) to have the value of Osiris reappraised pursuant to the terms of the
Shareholders' Agreement and (ii) to require Osiris to repurchase the Esner
Shares pursuant to a new appraisal and the alleged terms of the Shareholders'
Agreement or, alternatively, to pay the Esner Estate the fair value of the Esner
Shares as determined by the new appraisal.
On March 17, 1995, LGII purchased all of the issued and outstanding shares
of Osiris, including the Esner Shares. In connection with the purchase, LGII
entered into an indemnification agreement whereby Messrs. Miller and Shane
agreed to indemnify and hold LGII harmless with respect to any claims,
liabilities, losses and expenses, including reasonable attorneys' fees, in
connection with or arising from the Esner Estate litigation.
On April 9, 1996, the Executors filed a second complaint, which names
Messrs. Miller and Shane and LGII as defendants. The second complaint alleges
breach of contract, fraud and related claims against Messrs. Miller and Shane,
and that LGII joined in a civil conspiracy by acquiring Osiris. The Executors
request compensatory damages of $24,300,000 against the various defendants, and
seek punitive damages from Messrs. Miller and Shane. The two cases have been
consolidated by the Court. LGII has moved for a dismissal of the claims against
it for failure to state a claim upon which relief can be granted. That motion
has not yet been ruled upon. No provision with respect to these lawsuits has
been made in the Company's financial statements.
Environmental contingencies and liabilities
The Company's operations are subject to numerous environmental laws,
regulations and guidelines adopted by various governmental authorities in the
jurisdictions in which the Company operates. Liabilities are recorded when
environmental liabilities are either known or considered probable and can be
reasonably estimated. The Company policies are designed to control environmental
risk upon acquisition through extensive due diligence and corrective measures
taken prior to acquisition. The Company believes environmental liabilities to be
immaterial individually and in the aggregate.
-9-
<PAGE> 12
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
Other
Reference is made to the Company's previously filed periodic reports for
additional information regarding the Company's settlements with Gulf National
and Provident.
The Company is a party to other legal proceedings in the ordinary course of
its business but does not expect the outcome of any other proceedings,
individually or in the aggregate, to have a material adverse affect on the
Company's financial position, results of operation or liquidity.
NOTE 7. PROPOSED INVESTMENT IN PRIME SUCCESSION, INC.
On June 17,1996, the Company and Blackstone Capital Partners II Merchant
Banking Fund L.P. ("Blackstone") announced the signing of an agreement to
acquire the shares of Prime Succession, Inc. ("Prime"). Prime is the largest
privately-held funeral services company in North America, with 146 funeral homes
and 16 cemeteries across the United States.
A new entity formed by the Company and Blackstone, Prime Succession
Acquisition Corp ("PSAC") will acquire Prime for approximately $320,000,000
including third party liabilities to be paid at closing of $148,200,000.
Blackstone will contribute approximately $52,000,000 for a controlling interest
in PSAC. The Company will contribute approximately $78,000,000, of which
$25,000,000 has been paid to date, and will receive $16,000,000 common equity
and approximately $62,000,000 of preferred stock with an annual payment-in-kind
of 10%. The Company's investment will be accounted for under the equity method.
The agreement provides that the Company has a call option that can be
exercised on the fourth anniversary of the closing date and for two years
thereafter, during which the Company can acquire Blackstone's interest in PSAC.
In addition, Blackstone has a put option that can be exercised beginning on the
sixth anniversary of the closing date and for two years thereafter, during which
Blackstone can require the Company to acquire its interest in PSAC. The option
price, in either case, will be based on a formula involving cash flow from
operations.
The acquisition, which is expected to be completed by mid-September 1996,
is subject to a number of conditions, including regulatory approval and the
ability of PSAC to obtain financing. Until August 15, 1996, PSAC can elect not
to proceed with the transaction if PSAC determines that financing cannot be
obtained. In such event, the Company has the sole option to (i) forfeit amounts
previously paid or (ii) make an additional payment and complete the Prime
acquisition directly for its own benefit by November 15, 1996, and forfeit
amounts previously paid if the acquisition is not consummated. If the Company
ultimately forfeits amounts previously paid, the Company would be required to
write off such amounts and related costs and expenses.
NOTE 8. SUBSEQUENT EVENTS
(a) Acquisitions
During the period from July 1, 1996 to July 26, 1996, the Company acquired
13 funeral homes and 16 cemeteries. The aggregate cost of these transactions was
approximately $30,000,000.
As at July 26, 1996, the Company has committed to acquire certain funeral
homes and related operations, excluding the proposed investment in Prime
Succession, Inc., subject in most instances to certain conditions including
approval by the Company's Board of Directors. The aggregate cost of these
transactions will be approximately $198,000,000.
NOTE 9. UNITED STATES ACCOUNTING PRINCIPLES
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") in Canada. These principles
differ from GAAP in the United States as
-10-
<PAGE> 13
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
described in Note 21 of the Company's consolidated financial statements for the
year ended December 31, 1995.
The major differences between Canadian and U.S. GAAP during the period from
January 1, 1996 to June 30, 1996 results from the application of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes and for
insurance operations, the effect of which are summarized below:
(a) Earnings
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net earnings in accordance with Canadian
GAAP...................................... $19,489 $12,340 $36,712 $26,397
Effects of differences in accounting for:
Insurance operations (see (c))............ (691) -- (691) --
Stock options............................. -- (33) -- (65)
Income taxes, including income tax effects
of above............................... 528 127 952 312
------- ------- ------- -------
Net earnings in accordance with
U.S. GAAP................................. $19,326 $12,434 $36,973 $26,644
======= ======= ======= =======
</TABLE>
(b) Acquisitions
The effect of acquisitions during the six months ended June 30, 1996 at
dates of purchase, as reported in Note 2 would be affected as follows:
<TABLE>
<CAPTION>
CANADIAN GAAP DIFFERENCE U.S. GAAP
------------- ---------- ---------
<S> <C> <C> <C>
Cemetery property.............................. $ 129,389 $ 33,581 $162,970
Present value of insurance policies acquired... -- 15,785 15,785
Property and equipment......................... 71,801 297 72,098
Names and reputations.......................... 104,318 5,360 109,678
Insurance policy liabilities................... (125,207) (16,082) (141,289)
Deferred income tax asset (liability).......... 620 (38,941) (38,321)
</TABLE>
(c) Insurance operations
Present value of insurance policies
Under U.S. GAAP, the Company recognizes an asset that represents the
actuarially-determined present value of the projected future profits of the
insurance in-force at dates of acquisition. Canadian GAAP does not recognize
such an asset. The asset is being amortized to insurance expense over the
estimated life of the insurance in-force at the date of acquisition.
Deferred policy acquisition costs
Under U.S. GAAP, the Company defers costs related to the production of new
business which consist principally of commissions, certain underwriting and
agency expenses, and the costs of issuing policies. Deferred policy acquisition
costs are amortized over the expected premium-paying periods of the related
policies. Canadian GAAP does not permit deferral of such costs. At June 30,
1996, the deferred acquisition costs were approximately $1,300,000.
-11-
<PAGE> 14
THE LOEWEN GROUP INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
TABULAR AMOUNTS EXPRESSED IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE AMOUNTS
Insurance policy liabilities
Insurance policy liabilities which represent liabilities for future
insurance policy benefits, are accounted for under U.S. GAAP using the net level
premium method which involves different actuarial assumptions and methodologies
than the policy premium method used for Canadian GAAP. In addition, under
Canadian GAAP, all actuarial assumptions are re-evaluated on a periodic basis,
resulting in adjustments to insurance policy liabilities and insurance costs and
expenses. Under U.S. GAAP, assumptions established at the time a policy is
written are locked in and only revised if it is determined that future
experience will worsen from that previously assumed.
(d) Unrealized gains and losses
As a result of differences in accounting for insurance invested assets as
described in the Company's financial statements for the year ended December 31,
1995 insurance invested assets under U.S. GAAP would decrease by $2,417,000 and
shareholders' equity would decrease by $1,569,000, net of deferred income taxes
of $848,000.
(e) Statement of cash flows
Cash applied to operations and cash provided by financing would decrease by
$101,346,000 because shares and debt issued for legal settlements and declared
but unpaid Common and Preference share dividends would be considered as non-cash
transactions.
(f) Earnings per share
The number of shares in thousands, used in the calculation of earnings per
share for the six months ended June 30, 1996 and 1995 were 55,026
(1995 -- 43,556) for primary earnings per share and 55,290 (1995 -- 43,690) for
fully diluted earnings per share.
The number of shares in thousands, used in the calculation of earnings per
share for the three months ended June 30, 1996 and 1995 were 59,380
(1995 -- 45,091) for primary earnings per share and 59,513 (1995 -- 45,331) for
fully diluted earnings per share.
The earnings per share under U.S. GAAP are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Primary earnings per share.............. $0.29 $0.27 $0.60 $0.61
Fully diluted earnings per share........ $0.29 $0.27 $0.60 $0.61
</TABLE>
-12-
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
ALL FIGURES ARE IN UNITED STATES DOLLARS UNLESS OTHERWISE INDICATED. THE
"COMPANY" REFERS TO THE LOEWEN GROUP INC., A CORPORATION ORGANIZED UNDER THE
LAWS OF BRITISH COLUMBIA, CANADA ("TLGI"), AND ITS SUBSIDIARIES AND ASSOCIATED
ENTITIES. THIS REPORT, OTHER DOCUMENTS THAT ARE PUBLICLY DISSEMINATED BY THE
COMPANY AND ORAL STATEMENTS THAT ARE MADE ON BEHALF OF THE COMPANY CONTAIN BOTH
STATEMENTS OF HISTORICAL FACT AND FORWARD-LOOKING STATEMENTS. EXAMPLES OF
FORWARD-LOOKING STATEMENTS INCLUDE (I) PROJECTIONS OF REVENUE, EARNINGS, CAPITAL
STRUCTURE AND OTHER FINANCIAL ITEMS, (II) STATEMENTS OF THE PLANS AND OBJECTIVES
OF THE COMPANY OR ITS MANAGEMENT, (III) STATEMENTS OF FUTURE ECONOMIC
PERFORMANCE AND (IV) ASSUMPTIONS UNDERLYING STATEMENTS REGARDING THE COMPANY OR
ITS BUSINESS. SEE PART II, ITEM 5, OTHER INFORMATION, FOR ADDITIONAL INFORMATION
REGARDING FORWARD-LOOKING STATEMENTS, INCLUDING A LIST OF IMPORTANT FACTORS,
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM ANY FORWARD-LOOKING STATEMENTS.
INTRODUCTION
The Company operates the second-largest number of funeral homes and
cemeteries in North America and the largest number of funeral homes in Canada.
The Company also engages in the pre-need selling of funeral, cemetery, and
cremation merchandise and services. As at July 26, 1996, the Company operated
909 funeral homes (not all of which are wholly owned) throughout North America.
This included 796 funeral homes in the United States (including locations in
Puerto Rico) and 113 funeral homes in Canada. In addition, as at such date, the
Company operated 247 cemeteries in the United States and six cemeteries in
Canada.
The funeral service industry has a number of attractive characteristics.
Historically the funeral service industry has had a low business failure risk
compared with most other businesses and has not been significantly affected by
economic or market cycles. In addition, future demographic trends are expected
to contribute to the continued stability of the funeral service industry. The
U.S. Department of Commerce, Bureau of the Census, projects that the number of
deaths in the United States will grow at approximately 1.0% annually from 1990
through 2010. Finally, the funeral service industry in North America is highly
fragmented, consisting primarily of small, stable, family-owned businesses.
Management estimates that notwithstanding the increasing trend toward
consolidation over the last few years, only approximately 10% of the 23,500
funeral homes and approximately 7% of the 11,000 cemeteries in North America are
currently owned and operated by the five largest publicly-traded North American
funeral service companies.
The Company capitalizes on these attractive industry fundamentals through a
growth strategy that emphasizes three principal components: (i) acquiring a
significant number of small, family-owned funeral homes and cemeteries; (ii)
acquiring "strategic" operations consisting predominantly of large,
multi-location urban properties that generally serve as platforms for acquiring
small, family-owned businesses in surrounding regions; and (iii) improving the
revenue and profitability of newly-acquired and established operations. As a
result of the successful implementation of this strategy, the Company has grown
significantly. Managing the Company's growth is critical to profitability, and
will continue to be one of the most important responsibilities and challenges
facing the Company.
RESULTS OF OPERATIONS
The Company's operations are directly affected by the level of recent
acquisitions and the performance of established operations. Detailed below for
the three months and the six months ended June 30, 1996 and the corresponding
periods in the prior year are the Company's operating results expressed in
dollar amounts as well as relevant percentages. Revenue, gross margin and
expenses other than income taxes are presented as a percentage of revenue.
Income taxes are presented as a percentage of earnings before income taxes.
-13-
<PAGE> 16
Three Months Ended June 30, 1996 Compared to Three Months Ended June 30,
1995
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------- ---------------
1996 1995 1996 1995
------ ------ ----- -----
(MILLIONS OF (PERCENT)
DOLLARS)
<S> <C> <C> <C> <C>
REVENUE
Funeral................................................. $133.7 $104.8 59.9% 75.8%
Cemetery................................................ 67.9 33.5 30.4 24.2
Insurance............................................... 21.6 -- 9.7 --
------ ------ ----- -----
Total................................................ 223.2 138.3 100.0% 100.0%
====== ====== ===== =====
GROSS MARGIN
Funeral................................................. $ 53.5 $ 43.3 40.0% 41.3%
Cemetery................................................ 22.1 9.5 32.5 28.3
Insurance............................................... 5.0 -- 23.0 --
------ ------
Total................................................ 80.6 52.8 36.1 38.2
====== ======
EXPENSES
General and administrative.............................. 17.2 12.1 7.7 8.8
Depreciation and amortization........................... 13.1 9.1 5.9 6.6
------ ------
EARNINGS FROM OPERATIONS.................................. 50.3 31.6 22.5 22.8
Interest on long-term debt.............................. 21.0 12.6 9.4 9.1
Dividends on preferred securities of subsidiary......... 1.8 1.8 0.8 1.3
Income taxes............................................ 8.0 4.9 29.1 28.4
------ ------
NET EARNINGS.............................................. $ 19.5 $ 12.3 8.7% 8.9%
====== ======
</TABLE>
Consolidated revenue increased 61.4% to $223.2 million for the three months
ended June 30, 1996 from $138.3 million for the same period in 1995, with
funeral revenue increasing 27.6% and cemetery revenue increasing 102.8%.
Consolidated gross margin increased 52.5% to $80.6 million in 1996 from $52.8
million in 1995, with funeral gross margin increasing 23.5% and cemetery gross
margin increasing 132.7%. As a percentage of revenue, consolidated gross margin
decreased to 36.1% for the three months ended June 30, 1996 from 38.2% for the
comparable period in 1995. The decrease in the consolidated gross margin was due
to the increased proportion of cemetery and insurance revenue with associated
lower margin and the decrease in funeral gross margin.
Funeral revenue increased to $133.7 million for the three months ended June
30, 1996 from $104.8 million for the same period in 1995, due to acquisitions.
Funeral gross margin decreased to 40.0% in 1996 from 41.3% in 1995 due primarily
to the impact of acquired operations with lower margins. Funeral revenue
increased by $0.8 million from locations in operation for all of the three
months ended June 30, 1995 and 1996 while the corresponding funeral gross margin
remained constant.
Cemetery revenue increased to $67.9 million for the three months ended June
30, 1996 from $33.5 million for the same period in 1995, primarily due to
acquisitions. Cemetery gross margin increased to 32.5% in 1996 from 28.3% in
1995 principally as a result of a higher level of pre-need sales and a shift in
products and services sold. The cemetery revenue from locations in operation for
all of the three months ended June 30, 1995 and 1996 increased by $5.1 million
while the corresponding cemetery gross margin increased by 2.0% from 30.5% to
32.5%, both principally as a result of a higher level of pre-need sales and a
shift in products and services sold.
Insurance revenue was $21.6 million for the three months ended June 30,
1996. No insurance revenue was reported for the three months ended June 30,
1995. On March 26, 1996, the Company acquired certain net assets of S.I.
Acquisition Associates, L.P. ("S.I.") for approximately $145 million, which
assets included two insurance companies.
-14-
<PAGE> 17
United States based operations contributed 93.6% of the consolidated
revenue for the three months ended June 30, 1996 compared with 90.7% for the
same period in 1995.
General and administrative expenses for the three months ended June 30,
1996 increased to $17.2 million from $12.1 million for the same period in 1995.
The increase in general and administrative expenses is primarily a result of the
expansion of the Company's infrastructure necessary to integrate acquired
operations, particularly in the cemetery division. Interest expense on long-term
debt increased by $8.5 million, primarily as a result of additional borrowings
by the Company to finance its acquisitions and capital expenditures.
Income taxes were $8.0 million for the three months ended June 30, 1996,
resulting in an effective tax rate of 29.1% compared to $4.9 million for the
same period in 1995, and an effective tax rate of 28.4%. This increase is a
result of changes made to align the effective year-to-date tax rate to the
expected annual tax rate for each of the respective years.
Net earnings increased 57.9% to $19.5 million for the three months ended
June 30, 1996 from $12.3 million for the same period in 1995. Fully diluted
earnings per share ("EPS") increased 7.1% to $0.30 per share from $0.28 per
share. EPS did not increase as significantly as net earnings primarily as a
result of the increased number of Common shares without par value ("Common
Shares") outstanding and the effect of dividends on TLGI's 6.00% Cumulative
Redeemable Convertible First Preferred Shares, Series C ("Series C Preferred
Shares").
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
<TABLE>
<CAPTION>
SIX MONTHS ENDED SIX MONTHS
JUNE 30, ENDED JUNE 30,
----------------- ---------------
1996 1995 1996 1995
------ ------ ----- -----
<S> <C> <C> <C> <C>
(MILLIONS OF (PERCENT)
DOLLARS)
REVENUE
Funeral................................................. $266.9 $211.7 64.2% 78.9%
Cemetery................................................ 121.2 56.6 29.1 21.1
Insurance............................................... 28.1 -- 6.7 --
------ ------ ----- -----
Total................................................... 416.2 268.3 100.0% 100.0%
====== ====== ===== =====
GROSS MARGIN
Funeral................................................. $109.5 $ 90.4 41.0% 42.7%
Cemetery................................................ 38.5 16.0 31.7 28.2
Insurance............................................... 6.1 -- 21.7 --
------ ------
Total................................................... 154.1 106.4 37.0 39.7
EXPENSES
General and administrative.............................. 33.9 22.6 8.1 8.4
Depreciation and amortization........................... 24.7 17.5 5.9 6.5
------ ------
EARNINGS FROM OPERATIONS.................................. 95.5 66.3 23.0 24.7
Interest on long-term debt.............................. 39.6 24.0 9.5 8.9
Dividends on preferred securities of subsidiary......... 3.5 3.5 0.9 1.3
Income taxes............................................ 15.7 12.4 30.0 32.0
------ ------
NET EARNINGS.............................................. $ 36.7 $ 26.4 8.8% 9.8%
====== ======
</TABLE>
Consolidated revenue increased 55.1% to $416.2 million for the six months
ended June 30, 1996 from $268.3 million for the same period in 1995, with
funeral revenue increasing 26.1% and cemetery revenue increasing 114.0%.
Consolidated gross margin increased 44.8% to $154.1 million in 1996 from $106.4
million in 1995, with funeral gross margin increasing 21.1% and cemetery gross
margin increasing 140.5%. As a percentage of revenue, consolidated gross margin
decreased to 37.0% for the six months ended June 30, 1996 from 39.7% for the
comparable period in 1995. The decrease in the consolidated gross margin was due
to the
-15-
<PAGE> 18
increased proportion of cemetery and insurance revenue with associated lower
margins and the decrease in funeral gross margin.
Funeral revenue increased to $266.9 million for the six months ended June
30, 1996 from $211.7 million for the same period in 1995, primarily due to
acquisitions. Funeral gross margin decreased to 41.0% in 1996 from 42.7% in 1995
due primarily to the impact of acquired operations with lower margins. Funeral
revenue increased by $0.7 million from locations in operation for all of the six
months ended June 30, 1995 and 1996 while the corresponding funeral gross margin
remained constant.
Cemetery revenue increased to $121.2 million for the six months ended June
30, 1996 from $56.6 million for the same period in 1995, primarily due to
acquisitions. Cemetery gross margin increased to 31.7% in 1996 from 28.2% in
1995 principally as a result of a higher level of pre-need sales and a shift in
products and services sold. The cemetery revenue from locations in operation for
all of the six months ended June 30, 1995 and 1996 increased by $11.1 million
while the corresponding cemetery gross margin increased by 4.5% from 27.0% to
31.5%, both principally due to a higher level of pre-need sales and a shift in
products and services sold.
United States based operations contributed 93.1% of the consolidated
revenue for the six months ended June 30, 1996 compared with 90.4% for the same
period in 1995.
General and administrative expenses for the six months ended June 30, 1996
increased to $33.9 million from $22.6 million for the same period in 1995. The
increase in general and administrative expenses is primarily a result of the
controlled expansion of the Company's infrastructure due to the integration of
acquired operations, particularly in the cemetery division. Interest expense on
long-term debt increased by $15.6 million, primarily as a result of additional
borrowings by the Company to finance its acquisitions and capital expenditures.
Income taxes were $15.7 million for the six months ended June 30, 1996,
resulting in an effective tax rate of 30.0% compared to $12.4 million for the
same period in 1995, and an effective tax rate of 32.0%. The decrease in the
effective tax rate for the six months ended June 30, 1996 reflects the
continuing expansion of the Company's international financing arrangements.
Net earnings increased 39.1% to $36.7 million for the six months ended June
30, 1996 from $26.4 million for the same period in 1995. EPS decreased 3.2% to
$0.60 per share from $0.62 per share primarily as a result of the increased
number of Common Shares outstanding and the effect of dividends on TLGI's Series
C Preferred Shares. Management's EPS goal for the 1996 fiscal year is
$1.30-$1.40. See Item 5.
ACQUISITIONS AND CAPITAL EXPENDITURES
The Company acquired 83 funeral homes, 58 cemeteries and two insurance
companies during the six months ended June 30, 1996 for consideration of
approximately $362 million through 83 separate acquisition transactions. Of
these acquisitions, 78 funeral homes, 57 cemeteries and the two insurance
companies were located in the United States. Included in these acquisitions is
the March 1996 purchase of 15 funeral homes, two cemeteries and two insurance
companies from S.I. for approximately $145 million. As a result of this
acquisition, the Company recorded approximately $186 million of insurance
invested assets and approximately $125 million of insurance policy liabilities.
During the six months ended June 30, 1995, the Company acquired 81 funeral homes
and 39 cemeteries for consideration of approximately $178 million.
As of July 26, 1996, the Company had signed agreements, some of which are
non-binding, for the acquisition of 63 additional funeral homes and 55
additional cemeteries aggregating approximately $198 million (the "Signed
Acquisitions"). The Company expects to close most of the Signed Acquisitions by
the end of 1996. In addition, as at July 26, 1996, the Company was in the
process of evaluating or negotiating prospective acquisitions in competition
with other potential purchasers. Several of such potential acquisitions, one or
more of which may be completed in 1996, could be considered significant based on
acquisition price. The Company is not able at this time to determine the number
or aggregate purchase price of the prospective acquisitions to which the Company
may become committed. The Company does not expect that all such acquisitions
will be completed during 1996, if at all.
-16-
<PAGE> 19
In addition, in June 1996, the Company and Blackstone Capital Partners II
Merchant Banking Fund L.P. ("Blackstone") announced the signing of an agreement
to acquire the shares of Prime Succession, Inc. ("Prime"), the largest
privately-held funeral services company in North America, with 146 funeral homes
and 16 cemeteries in 20 states. The acquisition, which is to be made by Prime
Succession Acquisition Corp. ("PSAC"), a new company formed by the Company and
Blackstone, is expected to be completed by mid-September 1996, subject to a
number of conditions including regulatory approval and the ability of PSAC to
obtain financing for the acquisition. Until August 15, 1996, PSAC can elect not
to proceed with the transaction if PSAC determines that financing cannot be
obtained. In such event, the Company has the sole option to (i) forfeit amounts
previously paid or (ii) make an additional payment and complete the Prime
acquisition directly for its own benefit by November 15, 1996 (and forfeit
amounts previously paid if the acquisition is not consummated). If the Company
ultimately forfeits amounts previously paid, the Company would be required to
write-off such amounts and related costs and expenses. Any such write-offs would
have a material adverse effect on the Company's financial results for the period
and year in which such write-offs occur. See Note 7 to the Company's June 30,
1996 financial statements for additional information regarding the Company's
investment in PSAC.
During the six months ended June 30, 1996, $9.7 million was invested in the
construction of new funeral homes and the development of cemetery properties as
compared to $5.2 million for the same period in 1995. In addition, during the
six months ended June 30, 1996, the Company expended $15.2 million on capital
improvements as compared to $9.1 million for the same period in 1995.
From time to time, the Company may dispose of non-core assets or businesses
acquired in conjunction with the acquisition of funeral homes and cemeteries. In
addition, the Company expects to continue to combine or sell a small number of
locations in order to utilize its resources to produce a better return from its
assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company plans to fund future acquisitions through a combination of debt
and equity offerings and borrowings under its credit facilities (described
below). The Company believes that cash flow from operations generally will be
sufficient to meet working capital and short-term liquidity requirements for
current operations and to fund interest payments and dividends. The Company
plans to finance principal repayments on debt primarily through the issue of
additional debt or borrowings under revolving credit facilities and plans to
ensure available financing well in advance of scheduled principal repayment
dates, thereby protecting the Company's liquidity and maintaining its financial
flexibility.
The Company's objective is to maintain its long-term debt/equity ratio, on
average, in a range of 1.0:1 to 1.5:1. Due to the timing of its ongoing
acquisition program, the Company's long-term debt/equity ratio typically will
rise to the high end of the range, and then will be reduced substantially by an
equity issue. At June 30, 1996 the Company's long-term debt/equity ratio was
1.1:1 as a result of the recently completed 1996 Equity Offering and the 1996
Preferred Share Offering (as defined below).
The Company's balance sheet at June 30, 1996 , as compared to December 31,
1995, reflects changes principally from acquisitions during 1996 as described
further in Note 2 to the Company's June 30, 1996 Financial Statements. The
Company's statement of changes in financial position for the six months ended
June 30, 1996 reflects cash applied to operations of $151 million, primarily as
a result of legal settlements of $165 million recorded in 1995 but funded in the
first quarter of 1996.
During 1995 and 1996 the Company significantly expanded its cemetery
pre-need sales programs. Cemetery pre-need sales typically are structured with
low initial cash payments by the customer. The balance due is recorded as an
installment contract receivable and the future liability for merchandise as an
other liability. The increase in the level of pre-need sales has resulted in an
increase in both current and long-term receivables and other liabilities.
-17-
<PAGE> 20
Debt and Equity Offerings
In January 1996, TLGI completed a public offering (the "1996 Preferred
Share Offering") in Canada and a simultaneous private placement in the United
States of 8,800,000 receipts convertible into Series C Preferred Shares for
gross proceeds of Cdn.$220 (U.S.$161) million. The gross proceeds were deposited
with an escrow agent. The net proceeds were released to the Company from time to
time to fund acquisitions by depositing with the escrow agent an equal dollar
amount of Series C Preferred Shares. By June 1996, 8,800,000 Series C Preferred
Shares had been deposited with the escrow agent and all of the net proceeds had
been released to the Company.
In March 1996, Loewen Group International, Inc. ("LGII") consummated a
private placement of Senior Guaranteed Notes (the "1996 Senior Notes") in the
United States for gross proceeds of $350 million (the "1996 Senior Notes
Offering"). Concurrently with the 1996 Senior Notes Offering, TLGI completed a
public offering in Canada and a simultaneous private placement in the United
States of 7,000,000 Common Shares and, in April 1996, sold an additional 700,000
Common Shares (pursuant to the exercise of an over-allotment option) for
aggregate gross proceeds of approximately Cdn.$302 (U.S.$221) million (the "1996
Equity Offering"). The proceeds of the 1996 Senior Notes Offering and the 1996
Equity Offering were used to pay down the balance on the Multi-Currency Revolver
(described below) and for general corporate purposes including acquisitions.
Debt
On May 31, 1996, LGII entered into a five-year $750 million secured
revolving credit facility (the "1996 Revolving Credit Facility") with a
syndicate of banks.
The Company also has a Cdn.$50 million revolving credit facility that
matures in July 1999 (the "Canadian Revolver"), which was amended in July 1996
to modify certain covenants to parallel the 1996 Revolving Credit Facility. A
subsidiary of the Company has a $116 million secured term loan implemented in
connection with the 1994 Management Equity Investment Plan that will terminate
in July 2000 (the "MEIP Loan"), which also was amended in July 1996 to modify
certain covenants to parallel the 1996 Revolving Credit Facility. The Company
has a Cdn.$35 million five-year term loan that will terminate in January 2000
(the "Canadian Term Loan").
LGII had a $400 million unsecured multi-currency revolving credit facility
with a bank syndicate that was scheduled to mature in May 2000 (the
"Multi-Currency Revolver"). LGII also had a $100 million 364-day unsecured
multi-currency revolving credit facility with the same syndicate of banks that
expired on May 10, 1996. On May 31, 1996 the Multi-Currency Revolver was repaid
in full and retired.
As at June 30, 1996, LGII and TLGI had outstanding an aggregate of $246.6
million of senior amortizing notes, issued in five series (Series A through
Series E) in 1991, 1993, and 1994 (the "Series A-E Senior Notes"). The Series
A-E Senior Notes bear interest at rates ranging from 6.49% to 9.93% and have
initial terms of seven to ten years.
In addition, as at June 30, 1996, LGII had outstanding $350 million of 1996
Senior Notes. The 1996 Senior Notes were issued in two series. One series, in
the aggregate principal amount of $225 million bears interest at the rate of
7.5% and has a five-year term, and the other series, in the aggregate principal
amount of $125 million, bears interest at the rate of 8.25% and has a seven-year
term.
On May 31, 1996, the Company, LGII and their senior lenders entered into a
collateral trust arrangement whereby the senior lenders would share certain
collateral on a pari passu basis. This collateral includes (i) a pledge for the
benefit of the senior lenders of the shares held by TLGI of substantially all of
the subsidiaries in which TLGI directly or indirectly holds more than a 50%
voting or economic interest and (ii) all of the financial assets of LGII (LGII
does not have material assets other than financial assets). The collateral is
held by a trustee for the equal and ratable benefit of the various holders of
senior indebtedness. This senior lending group consists of the lenders under the
1996 Revolving Credit Facility, the Canadian Revolver, the MEIP Loan, and the
Canadian Term Loan as well as the holders of the Series A-E Senior Notes and the
1996 Senior Notes.
-18-
<PAGE> 21
The above credit facilities and loan agreements contain various restrictive
provisions, including provisions restricting payment of dividends on Common and
Preferred Shares, limiting redemption or repurchase of shares, limiting
disposition of assets, limiting the amount of additional debt, limiting the
amount of capital expenditures and maintaining specified financial ratios.
Interest Rate Risk Management
The Company enters into derivative transactions with financial institutions
only as hedges of other financial transactions and not for speculative purposes.
The Company's policies do not allow leveraged transactions and are designed to
minimize credit and concentration risk with counter-parties. The Company's
practice is to use swaps and options to manage its exposure to interest rate
movements. Going forward, the Company's strategy is to maintain an average of
between 60% and 80% of its debt subject to fixed interest rates, although at any
point in time during a period the percentage of debt subject to fixed interest
rates may be higher or lower. The Company also uses futures and options to fix
the interest rate of anticipated financing transactions in advance. All
derivatives are entered into as hedges based on several criteria, including the
timing, size and term of the anticipated transaction. Any gain or loss from an
effective hedging transaction is deferred and amortized over the life of the
financing transaction as an adjustment to interest expense.
-19-
<PAGE> 22
PART II
ITEM 1. LEGAL PROCEEDINGS.
Class Action Lawsuits
On November 4, 1995, a class action lawsuit claiming violations of Federal
securities laws was filed on behalf of a class of purchasers of Company
securities against TLGI and five officers (four of whom are directors) in the
United States District Court for the Eastern District of Pennsylvania. LGII,
Loewen Group Capital, L.P. ("LGCLP") and the lead underwriters ("Underwriters")
of the 1994 offering of Monthly Income Preferred Securities by LGII and LGCLP
were subsequently added as defendants. On November 7, 1995, a class action
lawsuit was filed on behalf of a class of purchasers of Common Shares against
TLGI and the same individual defendants in the United States District Court for
the Southern District of Mississippi alleging Federal securities law violations
and related common law claims. On December 1, 1995, a class action lawsuit was
filed on behalf of a class of purchasers of the Company's securities against
TLGI, LGII, LGCLP and the same individual defendants in the United States
District Court for the Eastern District of Pennsylvania.
Each of the three class actions (collectively, the "Class Actions") alleges
that the defendants failed to disclose the Company's anticipated liability in
connection with certain litigation with J.J. O'Keefe, Sr., Gulf National
Insurance Company and certain affiliates (collectively, "Gulf National"). The
Pennsylvania Class Actions also allege failure to disclose the potential
liability in connection with certain litigation with Provident American
Corporation and a subsidiary (together, "Provident"). The Company settled the
lawsuits with Gulf National and Provident during the first quarter of 1996.
In each of the Class Actions, the plaintiffs seek compensatory money
damages in an unspecified amount, together with attorneys fees, expert fees and
other costs and disbursements. In addition, the Mississippi Class Action seeks
unspecified punitive damages. The longest class period specified is from April
16, 1993 to November 1, 1995. Pursuant to a Transfer Order filed April 15, 1996
by the Judicial Panel on Multidistrict Litigation, the Mississippi Class Action
was transferred to the Eastern District of Pennsylvania for consolidation of
pretrial proceedings with the two Pennsylvania Class Actions. The plaintiffs are
expected to file a consolidated amended complaint on or before August 26, 1996.
LGII and Loewen expect that the claims in the consolidated complaint will not
differ substantially from the claims in each of the Class Actions.
On June 11, 1996 all claims against the Underwriters were dismissed without
prejudice, by agreement of the parties. Prior to the dismissal, the Underwriters
had indicated to the Company that they would seek indemnity from the Company for
costs incurred. The Company has agreed to pay the Underwriters costs through the
date of dismissal. The Company expects that the Underwriters will seek further
indemnity from the Company if any of the claims against the Underwriters are
reinstated.
The Company referred the claims to its insurance carrier under its
directors and officers insurance policy. On February 9, 1996 the carrier denied
coverage of the claim. The Company believes that such denial was improper. On
March 21, 1996, the Company commenced an action in British Columbia Supreme
Court seeking a declaration that the policy covers indemnification with respect
to the Class Actions. As of the date hereof, the Supreme Court had not ruled on
the action. The Company cannot predict at this time the extent to which any
settlement or litigation that may result from these claims will ultimately be
covered by insurance, if at all.
The Company has determined that it is not possible to predict the final
outcome of these legal proceedings and that it is not possible to establish a
reasonable estimate of possible damages, if any, or reasonably to estimate the
range of possible damages that may be awarded to the plaintiffs. Accordingly, no
provision has been made in the Company's financial statements.
Roe, et al., Palladino et al., O'Sullivan and Schneider
In October 1995, Roe and 22 other families filed a lawsuit against LGII and
Osiris Holding Corporation in Florida Circuit Court in St. Petersburg. In early
April 1996, a related lawsuit, Palladino et al., was filed by
-20-
<PAGE> 23
eight families against LGII and Osiris in Florida Circuit Court in St.
Petersburg, and was assigned to the same judge handling the Roe matter. In June
1996, the Roe and Palladino lawsuits were consolidated and amended to include a
total of 90 families (the "Consolidated Complaint") and in July 1996, the
Palladino lawsuit was dismissed. The gravamen of the Consolidated Complaint is
that in July 1992, employees of the Royal Palm Cemetery facility who were
installing a sprinkler line disturbed the remains of infants in one section of
the cemetery. The Consolidated Complaint also names TLGI as a defendant (on an
alter ego theory) and includes claims for negligent retention of certain
cemetery employees. Each plaintiff identified in the Consolidated Complaint is
seeking damages in excess of $15,000, but the Consolidated Complaint alleges
damages in excess of $40 million. In addition, in May 1996, Sean M. O'Sullivan
filed a lawsuit against Osiris and LGII and in July 1996, Karen Schneider filed
a lawsuit against Osiris and LGII. The factual allegations underlying the
O'Sullivan and Schneider complaints are identical to those alleged in the
Consolidated Complaint.
At the time the remains allegedly were disturbed, the Royal Palm Cemetery
was owned by Osiris. Osiris was acquired by the Company in March 1995. The
insurance carrier for Osiris has assumed the defense of these claims, subject to
a reservation of rights. The policy limit is $11 million. No provision with
respect to these lawsuits has been made in the Company's financial statements.
Rojas et al.
On February 22, 1995, Juan Rivera Rojas, Leyda Rivera Vega, the Conjugal
Partnership constituted between them, and Carlos Rivera Bustamente instituted a
legal action against the Company, LGII and a subsidiary in the United States
District Court for the District of Puerto Rico. The complaint alleges that the
defendants breached a contract and ancillary agreements with the plaintiffs
relating to the purchase of funeral homes and cemeteries, and committed related
torts. The plaintiffs seek compensatory damages of $12.5 million, and
unspecified punitive damages (although the Company is advised by counsel that
there is no entitlement to punitive damages under Puerto Rican law). The Company
has filed a motion to dismiss the complaint on the grounds of failure to join an
indispensable party. In addition, the Company claims it has suffered damages far
in excess of the amount claimed by the plaintiffs as a result of breach of
contract and related torts on the part of the plaintiffs. A subsidiary of the
Company has filed a complaint seeking damages in excess of $19 million from the
plaintiffs in the General Court of Justice of the Commonwealth of Puerto Rico.
The Company has determined that it is not possible to predict the final outcome
of these legal proceedings and that it is not possible to establish a reasonable
estimate of possible damages, if any, or reasonably to estimate the range of
possible damages that may be awarded to the plaintiffs. Accordingly, no
provision has been made in the Company's financial statements.
Esner Estate
On February 1, 1995, Stuart B. Esner and Sandra Esner (the "Executors") as
co-executors for the Estate of Gerald F. Esner (the "Esner Estate") filed an
action in the Court of Common Pleas in Bucks County, Pennsylvania against Osiris
and a law firm that previously represented Osiris and its principal
shareholders, Gerald F. Esner, Lawrence Miller and William R. Shane. Messrs.
Miller and Shane currently are executive officers of TLGI and LGII. The
complaint alleged that Osiris breached the terms of a Second Amended and
Restated Shareholders' Agreement among Messrs. Esner, Miller and Shane (the
"Shareholders' Agreement") by attempting to repurchase shares of Osiris held by
the Esner Estate (the "Esner Shares") without complying with the terms of the
Shareholders' Agreement, and that the law firm breached its fiduciary duty and
committed malpractice in connection with the drafting of the Shareholders'
Agreement and its representation of Esner and Osiris. The Executors asked the
Court (i) to have the value of Osiris reappraised pursuant to the terms of the
Shareholders' Agreement and (ii) to require Osiris to repurchase the Esner
Shares pursuant to a new appraisal and the alleged terms of the Shareholders'
Agreement or, alternatively, to pay the Esner Estate the fair value of the Esner
Shares as determined by the new appraisal.
On March 17, 1995, LGII purchased all of the issued and outstanding shares
of Osiris, including the Esner Shares. In connection with the purchase, LGII
entered into an indemnification agreement whereby Messrs. Miller and Shane
agreed to indemnify and hold LGII harmless with respect to any claims,
liabilities,
-21-
<PAGE> 24
losses and expenses, including reasonable attorneys' fees, in connection with or
arising from the Esner Estate litigation.
On April 9, 1996, the Executors filed a second complaint, which names
Messrs. Miller and Shane and LGII as defendants. The second complaint alleges
breach of contract, fraud and related claims against Messrs. Miller and Shane,
and that LGII joined in a civil conspiracy by acquiring Osiris. The Executors
request compensatory damages of $24.3 million against the various defendants,
and seek punitive damages from Messrs. Miller and Shane. The two cases have been
consolidated by the Court. LGII has moved for a dismissal of the claims against
it for failure to state a claim upon which relief can be granted. That motion
has not yet been ruled upon. No provision with respect to these lawsuits has
been made in the Company's financial statements.
Other
Reference is made to the Company's previously filed periodic reports for
additional information regarding the Company's settlements with Gulf National
and Provident.
The Company is a party to other legal proceedings in the ordinary course of
its business but does not expect the outcome of any other proceedings to have,
individually or in the aggregate, a material adverse affect on the Company's
financial position, results of operation or liquidity.
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
(a) The Annual General Meeting of Shareholders of the Company (the "AGM")
was held on May 16, 1996.
(b) Not applicable, because (i) proxies for the AGM were solicited pursuant
to Regulation 14 under the Securities Exchange Act of 1934, as amended, (ii)
there was no solicitation in opposition to the management's nominees as listed
in the proxy statement, and (iii) all of such nominees were elected.
(c) The following matters were voted upon at the AGM:
<TABLE>
<CAPTION>
NUMBER OF VOTES
------------------------------------------------------
WITHHELD/ BROKER
DESCRIPTION OF RESOLUTION FOR AGAINST ABSTENTIONS NON-VOTES
- --------------------------------------------- ---------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Election of directors
Timothy Robert Hogenkamp................... 41,019,235 0 702,745 0
Raymond Loewen Loewen...................... 41,016,650 0 705,330 0
Robert Bruce Lundgren...................... 41,019,330 0 702,650 0
Increase in the Number of Authorized First
Preferred Shares to 10,920,000 Shares and
Subdivision of the Series C Preferred
Shares on a Ten-For-One Basis.............. 38,299,011 426,353 135,254 0
Increase in Number of Authorized First
Preferred Shares to 200,000,000 Shares..... 32,483,041 6,315,763 62,649 0
Increase in the Number of Authorized Common
Shares to 750,000,000 Shares............... 34,897,234 7,187,146 54,444 0
Amendment to the Employee Stock Option Plan
(United States) to increase the number of
Common Shares issuable thereunder
by 650,000................................. 33,179,604 5,205,495 53,643 0
Amendment to the Employee Stock Option Plan
(Canada) to increase the number of Common
Shares issuable thereunder by 350,000...... 35,832,519 5,711,327 48,712 0
Appointment of KPMG Peat Marwick Thorne as
auditors................................... 41,559,538 0 155,919 0
Authorization of directors to fix the
remuneration to be paid to the auditors.... 41,702,480 7,671 9,504 0
</TABLE>
-22-
<PAGE> 25
In connection with the AGM, a special resolution to subdivide the Series C
Preferred Shares on a ten-for-one basis was approved by the requisite majority
of the holders of the Series C Preferred Shares at a meeting of the holders of
Series C Preferred Shares.
ITEM 5. OTHER INFORMATION.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Management has established a 1996 EPS goal of $1.30-$1.40 and a 1997 EPS
goal of $1.65-$1.75. Management believes that 1996 acquisitions will aggregate
approximately $600 million. The foregoing statement and certain other statements
made in this Form 10-Q, in other filings made with the Commission, and elsewhere
(including oral statements made on behalf of the Company) are forward-looking
statements within the meaning of Section 27A(i) of the Securities Act of 1933,
as amended, and Section 21E(i) of the Securities Exchange Act of 1934, as
amended. Shareholders and potential investors are hereby cautioned that certain
events or circumstances could cause actual results to differ materially from
those estimated, projected or predicted. In addition, forward-looking statements
are based on management's knowledge and judgment as of the date that such
statements are made. The Company undertakes no obligation to publicly release
the result of any revisions to these forward-looking statements that may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
The following important factors, among others, could cause the Company's
EPS, acquisition levels and other future results to differ materially from
estimates, predictions or projections included in forward-looking statements.
1. Acquisition Levels. The funeral services industry acquisition market is
extremely competitive. The Company's competition for acquisitions includes
Service Corporation International and Stewart Enterprises, Inc., both of which
are publicly-traded companies with significant United States operations.
Aggressive pricing by the Company's competitors, particularly for strategic
operations, may result in increased acquisition costs. The timing and certainty
of completion of potential acquisitions are based on many factors, including the
availability of financing. There can be no assurance that funds will be
available to complete all future acquisitions, and there can be no assurance
that the Company will complete any specific number of dollar amount or
acquisitions in a particular year.
2. Revenue. The most significant component of increases in revenue is the
level of acquisitions, discussed above. In addition, revenue is affected by the
volume of services rendered, and the mix and pricing of services and products
sold. The foregoing may be affected by fluctuations in the number of deaths,
competitive pricing strategies, pre-need sales and other sales programs
implemented by the Company.
3. General and Administrative Expenses. General and administrative
expenses were 8.1% of consolidated revenue for the first six months of 1996.
Management's goal is that general and administrative expenses for the 1996
fiscal year will be 8.0% of consolidated revenue. While the Company has
implemented various cost control measures, no assurances can be made that such
measures will be successful.
4. Legal Proceedings. The Company's 1995 results were materially and
adversely affected by the unanticipated outcome of certain legal proceedings.
There currently are material legal proceedings pending against the Company. The
Company is unable to predict the outcome of such proceedings at this time.
5. Other. EPS and consolidated financial results also may be affected by
(i) the ability of the Company to manage its growth by implementing appropriate
management and administrative support structures, (ii) margins achieved by
newly-acquired and established operations, (iii) the cost of the Company's
financing arrangements (including interest rates on long-term debt), (iv) the
number of Common Shares outstanding, (v) competition, (vi) the Company's
effective tax rate, (vii) the accounting treatment of acquisitions and the
valuation of assets and (viii) changes in applicable accounting principles and
governmental regulations.
-23-
<PAGE> 26
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
------------ --------------------------------------------------------------------
<C> <S>
3 CHARTER DOCUMENTS
3.1 Certificate of Incorporation, issued by the British Columbia
Registrar of Companies (the "Registrar") on October 30, 1985(1)
3.2 Altered Memorandum of TLGI, filed with the Registrar on June 21,
1996
3.3 Articles of TLGI, restated, filed with the Registrar on March 1,
1988, as amended on March 30, 1988, April 21, 1988, May 19, 1989,
May 28, 1992, May 20, 1993, June 29, 1994, December 21, 1995 and
February 7, 1996(2)
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
4.1 Indenture, dated as of March 20, 1996, by and between LGII, TLGI,
as guarantor of the obligations of LGII under the Indenture, and
Fleet National Bank of Connecticut, as Trustee, with respect to
Series, 1, 2, 3 and 4 Senior Guaranteed Notes of LGII(2)
4.2 Purchase Agreement, dated as of March 13, 1996, by and between
LGII, TLGI and the Initial Purchasers(3)
4.3 Receipt Agreement, dated as of January 3, 1996, for the Cumulative
Redeemable Convertible First Preferred Shares Series C of TLGI(2)
4.4 Shareholder Protection Rights Plan, dated as of April 20, 1990, as
amended on May 24, 1990 and April 7, 1994 and reconfirmed on May
17, 1995(1)
4.5 Amended and Restated Multi-currency Credit Agreement, dated as of
May 11, 1995, by and between LGII, as borrower, TLGI, as
guarantor, the banks named therein as lenders and The First
National Bank of Chicago, as agent for the banks named therein as
lenders(2)
4.6 Multi-currency Credit Agreement, dated as of May 11, 1995, by and
between LGII, as borrower, TLGI, as guarantor, the banks named
therein as lenders and The First National Bank of Chicago, as
agent for the banks named therein as lenders(4)
4.7 Zero Coupon Loan Agreement, dated as of November 1, 1994, by and
between WLSP Investment Parmers I, Neweol Finance B.V., Electrolux
Holdings B.V., Man Producten Rotterdam B.V., Adinvest A.G., and
Wachovia Bank of Georgia, N.A.(1)
4.8 Monthly Income Preferred Securities Guarantee Agreement, dated
August 15, 1994(5)
4.9 Indenture, dated as of August 15, 1994, by and between LGII, as
issuer, TLGI, as guarantor, and State Street Bank and Trust
Company, as trustee with respect to 9.45% Junior Subordinated
Debentures, Series A, due 2024, issued by LGII and guaranteed by
the Registrant(5)
4.10 Exchange Acknowledgment by TLGI, with respect to the 1994
Exchangeable Floating Rate Debentures due July 15, 2001 issued by
LGII, dated June 15, 1994(1)
4.11 1994 Management Equity Investment Plan ("MEIP") Credit Agreement,
dated as of June 14, 1994, by and between Loewen Management
Investment Corporation, in its capacity as agent for LGII
("LMIC"), TLGI and the banks listed therein (the "MEIP Banks") and
Wachovia Bank of Georgia, N.A., as agent for the MEIP Banks ("MEIP
Agent")(1)
4.12 Guaranty dated as of June 14, 1994 by TLGI in favor of the MEIP
Agent for the ratable benefit of the MEIP Banks(1)
4.13 Guaranty dated as of June 14, 1994 by LGII in favor of the MEIP
Agent for the ratable benefit of the MEIP Banks(1)
4.14 Security Agreement, dated as of June 14, 1994, by and between LMIC
and the MEIP Agent(1)
</TABLE>
-24-
<PAGE> 27
<TABLE>
<CAPTION>
Exhibit No. Description
------------ --------------------------------------------------------------------
<C> <S>
4.15 Note Agreement, dated for reference September 1, 1993, by and
between TLGI and LGII re 9.62% Senior Guaranteed Notes, Series D,
due September 11, 2003, issued by TLGI ("Series D Notes"), as
amended on June 10, 1994(1)
4.16 Note Agreement by LGII and TLGI re 6.49% Senior Guaranteed Notes,
Series E, due February 25, 2004, issued by LGII ("Series E
Notes"), dated for reference February 1, 1994(1)
4.17 Guaranty Agreement by TLGI re Series E Notes, dated for reference
February 1, 1994(1)
4.18 Guaranty Agreement by LGII re Series D Notes, dated for reference
April 1, 1993(1)
4.19 Note Agreement by TLGI and LGII re 9.70% Senior Guaranteed Notes,
Series A, due November 1, 1998, issued by LGII ("Series A Notes"),
9.93% Senior Guaranteed Notes, Series B, due November 1, 2001,
issued by LGII ("Series B Notes"), and 9.70 Senior Guaranteed
Notes, Series C, due November 1, 1998, issued by TLGI ("Series C
Notes"), dated for reference October 1, 1991(1)
4.20 Guaranty Agreement by TLGI re Series A Notes and Series B Notes,
dated for reference October 1, 1991(1)
4.21 Guaranty Agreement by LGII re Series C Notes, dated for reference
October 1, 1991(1)
4.22 Form of Senior Guarantee of the Notes (included in Exhibit 4.1)(2)
4.23 Form of Global Outstanding Note (included in Exhibit 4.1)(2)
4.24 Form of Physical Outstanding Note (included in Exhibit 4.1)(2)
4.25 Form of Global Exchange Note(3)
4.26 Form of Physical Exchange Note(3)
4.27 Credit Agreement, dated as of May 15, 1996, among LGII, as
borrower, TLGI, as a guarantor, the lenders named therein, as the
lenders, Goldman, Sachs & Co., as the documentation agent and Bank
of Montreal, as issuer, swingline lender and agent(3)
4.28 Collateral Trust Agreement, dated as of May 15, 1996, among
Bankers Trust Company, as trustee, TLGI, LGII and various other
pledgers(3)
4.29 Second Amendment, dated for reference May 15, 1996, to Note
Agreements, dated for reference October 1, 1991, among TLGI, LGII
and institutions named therein, re Series A Notes, Series B Notes
and Series C Notes(3)
4.30 Second Amendment, dated for reference May 15, 1996, to Note
Agreements, dated for reference September 1, 1993, among TLGI,
LGII and institutions named therein, re Series D Notes(3)
4.31 Second Amendment, dated for reference May 15, 1996, to Note
Agreements, dated for reference February 1, 1994, among TLGI, LGII
and Teachers Insurance and Annuity Association of America, re
Series E Notes(3)
4.32 TLGI hereby agrees to furnish to the Commission, upon request, a
copy of the instruments which define the rights of holders of
long-term debt of TLGI. None of such instruments not included as
exhibits herein collectively represents long-term debt in excess
of 10% of the consolidated total assets of TLGI.
10 MATERIAL CONTRACTS
10.1 Asset Purchase Agreement, dated as of March 26, 1996, by and
between Loewen Louisiana Holdings, Inc. and S.I. Acquisition
Associates, L.P.(2)
10.2 Asset Purchase Agreement, dated as of March 26, 1996, by and
between LLI, Inc., and LLPC, Inc. and S.I. Acquisition Associates,
L.P.(2)
</TABLE>
-25-
<PAGE> 28
<TABLE>
<CAPTION>
Exhibit No. Description
------------ --------------------------------------------------------------------
<C> <S>
10.3 Settlement Agreement and Mutual General Release effective as of
February 12, 1996, entered into on March 19, 1996, by and between
Provident American Corporation, Provident Indemnity Life Insurance
Company, TLGI and LGII(2)
10.4 Settlement Agreement, dated as of February 1, 1996, by and between
TLGI, LGII and affiliated entities and J.J. O'Keefe, Sr., Gulf
National Life Insurance Company and affiliated entities(2)
10.5 Shareholders' Agreement, dated as of February 9, 1996, by and
between TLGI, LGII, J.J. O'Keefe, Sr., Gulf National Life
Insurance Company and affiliated entities, and certain individuals
and law firms named therein(2)
10.6 Undertaking by Raymond L. Loewen and Anne Loewen, dated as of
January 3, 1996(5)
10.7 Registration Rights Agreement, dated as of March 20, 1996, by and
between LGII, TLGI and the Initial Purchasers named therein(2)
10.8 Stock Purchase Agreement, dated as of March 16, 1995, by and
between Osiris Holding Corporation and LGII(6)
*10.9 Employee Stock Option Plan (United States), as restated and
amended as at September 19, 1995(2)
*10.10 Employee Stock Option Plan (Canada), as restated and amended as at
September 19, 1995(2)
*10.11 1994 Outside Director Compensation Plan as amended as on April 7,
1995(2)
*10.12 1994 Management Equity Investment Plan(2)
*10.13 Form of Executive Agreement executed by participants in the
MEIP(1)
*10.14 Employment Agreement, dated October 9, 1991, by and between TLGI
and Timothy A. Birch(1)
*10.15 Employment Agreement, dated March 21, 1990, by and between TLGI
and David FitzSimmons(1)
*10.16 Employment Agreement, dated April 12, 1991, by and between TLGI
and Dwight Hawes(1)
*10.17 Employment Agreement, dated August 19, 1988, by and between TLGI
and Tim Hogenkamp(1)
*10.18 Employment Agreement, dated March 6, 1990, by and between TLGI and
Peter S. Hyndman(1)
*10.19 Employment Agreement, dated March 17, 1995, by and between TLGI,
LGII and Lawrence Miller(1)
*10.20 Employment Agreement, dated December 18, 1990, by and between TLGI
and Peter W. Roberts(1)
*10.21 Employment Agreement, dated March 17, 1995, by and between TLGI
and William R. Shane(1)
*10.22 Employment Agreement, dated April 27, 1993, by and between TLGI
and A.M. Bruce Watson(1)
*10.23 Employment Agreement, and Covenant Not to Compete, dated November
14, 1990, by and between LGII and Albert S. Lineberry, Sr.(1)
*10.24 Consulting Agreement, dated July 18, 1994, by and between TLGI and
Charles B. Loewen, LGII and Corporate Services International
Inc.(1)
*10.25 Employment Agreement, dated December 15, 1994, by and between TLGI
and Robert O. Wienke(2)
*10.26 Severance Agreement, dated June 15, 1995, by and between TLGI and
Robert Garnett(2)
*10.27 Resignation and Release Agreement, effective as of June 30, 1996,
by and between TLGI, LGII and Robert O. Wienke
</TABLE>
-26-
<PAGE> 29
<TABLE>
<CAPTION>
Exhibit No. Description
------------ --------------------------------------------------------------------
<C> <S>
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
27 FINANCIAL DATA SCHEDULE
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Compensatory plan or management contract
(1) Incorporated by reference from TLGI's Annual Report on Form 10-K for the year ended
December 31, 1994, filed on March 31, 1995
(2) Incorporated by reference from TLGI's Annual Report on Form 10-K for the year ended
December 31, 1995, filed on March 28, 1996, as amended
(3) Incorporated by reference from the S-4 Registration Statement filed with LGII and TLGI
(Nos. 333-03135 and 333-03135-01) with the Commission on May 13, 1996, as amended
(4) Incorporated by reference from TLGI's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995, filed on May 11, 1995
(5) Incorporated by reference from the combined Form F-9/F-3 Registration Statements filed
by the TLGI and LGII, respectively, (Nos. 33-81032 and 33-81034) with the Commission on
July 1, 1994, as amended on July 11, 1994 and August 2, 1994
(6) Incorporated by reference from TLGI's Periodic Report on Form 8-K filed on April 18,
1995
</TABLE>
-27-
<PAGE> 30
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONT.)
(b) Reports on Form 8-K
The following Current Reports on Form 8-K were filed by the Registrant
during the subject quarter:
<TABLE>
<CAPTION>
DATE OF REPORT ITEM NUMBER DESCRIPTION
- ------------------ --------------------- ------------------------------------------------
<S> <C> <C>
May 1, 1996 Item 7. Financial Financial Statements of certain businesses
Statements, Pro Forma acquired by TLGI and unaudited pro forma
Financial Information financial information concerning TLGI's
and Exhibits acquisitions of such businesses.
May 8, 1996 Item 5. Other Events Press release announcing earnings for the first
quarter of 1996
May 24, 1996 Item 5. Other Events Press release announcing additions to senior
management
May 31, 1996 Item 5. Other Events Press release announcing the completion of a
$750 million secured revolving bank line of
credit
June 4, 1996 Item 5. Other Events Press release announcing cash dividends on the
Company's Common shares and 6% Cumulative
Redeemable Convertible First Preferred Shares,
Series C.
June 6, 1996 Item 5. Other Events Press release announcing TLGI's new trading
symbol on Nasdaq.
March 26, 1996, Item 7. Financial Consolidated financial statements of Ourso
amended June 10, Statements, Pro Forma Investment Corporation and subsidiaries
1996 Financial Information (collectively, "Ourso") and unaudited pro forma
and Exhibits financial information concerning TLGI's
acquisitions of Ourso
June 17, 1996 Item 5. Other Events Press release announcing the formation of a
corporate venture between TLGI and Blackstone
Capital Partners to acquire Prime Succession,
Inc.
</TABLE>
-28-
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE LOEWEN GROUP INC.
By: /s/ PAUL WAGLER
-----------------------------------
Name: Paul Wagler
Date: August 13, 1996 Title: Senior Vice-President,
Finance
and Chief Financial Officer
By: /s/ WILLIAM G. BALLANTYNE
-----------------------------------
Name: William G. Ballantyne
Date: August 13, 1996 Title: Senior Vice-President,
Financial Control
and Administration
(Chief Accounting Officer)
-29-
<PAGE> 32
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------ ----------------------------------------------------------------
<S> <C> <C>
3 CHARTER DOCUMENTS
3.1 Certificate of Incorporation, issued by the British Columbia
Registrar of Companies (the "Registrar") on October 30,
1985(1)
3.2 Altered Memorandum of TLGI, filed with the Registrar on June
21, 1996
3.3 Articles of TLGI, restated, filed with the Registrar on March
1, 1988, as amended on March 30, 1988, April 21, 1988, May 19,
1989, May 28, 1992, May 20, 1993, June 29, 1994, December 21,
1995 and February 7, 1996(2)
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
4.1 Indenture, dated as of March 20, 1996, by and between LGII,
TLGI, as guarantor of the obligations of LGII under the
Indenture, and Fleet National Bank of Connecticut, as Trustee,
with respect to Series, 1, 2, 3 and 4 Senior Guaranteed Notes
of LGII(2)
4.2 Purchase Agreement, dated as of March 13, 1996, by and between
LGII, TLGI and the Initial Purchasers(3)
4.3 Receipt Agreement, dated as of January 3, 1996, for the
Cumulative Redeemable Convertible First Preferred Shares
Series C of TLGI(2)
4.4 Shareholder Protection Rights Plan, dated as of April 20,
1990, as amended on May 24, 1990 and April 7, 1994 and
reconfirmed on May 17, 1995(1)
4.5 Amended and Restated Multi-currency Credit Agreement, dated as
of May 11, 1995, by and between LGII, as borrower, TLGI, as
guarantor, the banks named therein as lenders and The First
National Bank of Chicago, as agent for the banks named therein
as lenders(2)
4.6 Multi-currency Credit Agreement, dated as of May 11, 1995, by
and between LGII, as borrower, TLGI, as guarantor, the banks
named therein as lenders and The First National Bank of
Chicago, as agent for the banks named therein as lenders(4)
4.7 Zero Coupon Loan Agreement, dated as of November 1, 1994, by
and between WLSP Investment Parmers I, Neweol Finance B.V.,
Electrolux Holdings B.V., Man Producten Rotterdam B.V.,
Adinvest A.G., and Wachovia Bank of Georgia, N.A.(1)
4.8 Monthly Income Preferred Securities Guarantee Agreement, dated
August 15, 1994(5)
4.9 Indenture, dated as of August 15, 1994, by and between LGII,
as issuer, TLGI, as guarantor, and State Street Bank and Trust
Company, as trustee with respect to 9.45% Junior Subordinated
Debentures, Series A, due 2024, issued by LGII and guaranteed
by the Registrant(5)
4.10 Exchange Acknowledgment by TLGI, with respect to the 1994
Exchangeable Floating Rate Debentures due July 15, 2001 issued
by LGII, dated June 15, 1994(1)
4.11 1994 Management Equity Investment Plan ("MEIP") Credit
Agreement, dated as of June 14, 1994, by and between Loewen
Management Investment Corporation, in its capacity as agent
for LGII ("LMIC"), TLGI and the banks listed therein (the
"MEIP Banks") and Wachovia Bank of Georgia, N.A., as agent for
the MEIP Banks ("MEIP Agent")(1)
4.12 Guaranty dated as of June 14, 1994 by TLGI in favor of the
MEIP Agent for the ratable benefit of the MEIP Banks(1)
4.13 Guaranty dated as of June 14, 1994 by LGII in favor of the
MEIP Agent for the ratable benefit of the MEIP Banks(1)
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------ ----------------------------------------------------------------
<S> <C> <C>
4.14 Security Agreement, dated as of June 14, 1994, by and between
LMIC and the MEIP Agent(1)
4.15 Note Agreement, dated for reference September 1, 1993, by and
between TLGI and LGII re 9.62% Senior Guaranteed Notes, Series
D, due September 11, 2003, issued by TLGI ("Series D Notes"),
as amended on June 10, 1994(1)
4.16 Note Agreement by LGII and TLGI re 6.49% Senior Guaranteed
Notes, Series E, due February 25, 2004, issued by LGII
("Series E Notes"), dated for reference February 1, 1994(1)
4.17 Guaranty Agreement by TLGI re Series E Notes, dated for
reference February 1, 1994(1)
4.18 Guaranty Agreement by LGII re Series D Notes, dated for
reference April 1, 1993(1)
4.19 Note Agreement by TLGI and LGII re 9.70% Senior Guaranteed
Notes, Series A, due November 1, 1998, issued by LGII ("Series
A Notes"), 9.93% Senior Guaranteed Notes, Series B, due
November 1, 2001, issued by LGII ("Series B Notes"), and 9.70
Senior Guaranteed Notes, Series C, due November 1, 1998,
issued by TLGI ("Series C Notes"), dated for reference October
1, 1991(1)
4.20 Guaranty Agreement by TLGI re Series A Notes and Series B
Notes, dated for reference October 1, 1991(1)
4.21 Guaranty Agreement by LGII re Series C Notes, dated for
reference October 1, 1991(1)
4.22 Form of Senior Guarantee of the Notes (included in Exhibit
4.1)(2)
4.23 Form of Global Outstanding Note (included in Exhibit 4.1)(2)
4.24 Form of Physical Outstanding Note (included in Exhibit 4.1)(2)
4.25 Form of Global Exchange Note(3)
4.26 Form of Physical Exchange Note(3)
4.27 Credit Agreement, dated as of May 15, 1996, among LGII, as
borrower, TLGI, as a guarantor, the lenders named therein, as
the lenders, Goldman, Sachs & Co., as the documentation agent
and Bank of Montreal, as issuer, swingline lender and agent(3)
4.28 Collateral Trust Agreement, dated as of May 15, 1996, among
Bankers Trust Company, as trustee, TLGI, LGII and various
other pledgers(3)
4.29 Second Amendment, dated for reference May 15, 1996, to Note
Agreements, dated for reference October 1, 1991, among TLGI,
LGII and institutions named therein, re Series A Notes, Series
B Notes and Series C Notes(3)
4.30 Second Amendment, dated for reference May 15, 1996, to Note
Agreements, dated for reference September 1, 1993, among TLGI,
LGII and institutions named therein, re Series D Notes(3)
4.31 Second Amendment, dated for reference May 15, 1996, to Note
Agreements, dated for reference February 1, 1994, among TLGI,
LGII and Teachers Insurance and Annuity Association of
America, re Series E Notes(3)
4.32 TLGI hereby agrees to furnish to the Commission, upon request,
a copy of the instruments which define the rights of holders
of long-term debt of TLGI. None of such instruments not
included as exhibits herein collectively represents long-term
debt in excess of 10% of the consolidated total assets of
TLGI.
10 MATERIAL CONTRACTS
10.1 Asset Purchase Agreement, dated as of March 26, 1996, by and
between Loewen Louisiana Holdings, Inc. and S.I. Acquisition
Associates, L.P.(2)
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------ ----------------------------------------------------------------
<S> <C> <C>
10.2 Asset Purchase Agreement, dated as of March 26, 1996, by and
between LLI, Inc., and LLPC, Inc. and S.I. Acquisition
Associates, L.P.(2)
10.3 Settlement Agreement and Mutual General Release effective as
of February 12, 1996, entered into on March 19, 1996, by and
between Provident American Corporation, Provident Indemnity
Life Insurance Company, TLGI and LGII(2)
10.4 Settlement Agreement, dated as of February 1, 1996, by and
between TLGI, LGII and affiliated entities and J.J. O'Keefe,
Sr., Gulf National Life Insurance Company and affiliated
entities(2)
10.5 Shareholders' Agreement, dated as of February 9, 1996, by and
between TLGI, LGII, J.J. O'Keefe, Sr., Gulf National Life
Insurance Company and affiliated entities, and certain
individuals and law firms named therein(2)
10.6 Undertaking by Raymond L. Loewen and Anne Loewen, dated as of
January 3, 1996(5)
10.7 Registration Rights Agreement, dated as of March 20, 1996, by
and between LGII, TLGI and the Initial Purchasers named
therein(2)
10.8 Stock Purchase Agreement, dated as of March 16, 1995, by and
between Osiris Holding Corporation and LGII(6)
*10.9 Employee Stock Option Plan (United States), as restated and
amended as at September 19, 1995(2)
*10.10 Employee Stock Option Plan (Canada), as restated and amended
as at September 19, 1995(2)
*10.11 1994 Outside Director Compensation Plan as amended as on April
7, 1995(2)
*10.12 1994 Management Equity Investment Plan(2)
*10.13 Form of Executive Agreement executed by participants in the
MEIP(1)
*10.14 Employment Agreement, dated October 9, 1991, by and between
TLGI and Timothy A. Birch(1)
*10.15 Employment Agreement, dated March 21, 1990, by and between
TLGI and David FitzSimmons(1)
*10.16 Employment Agreement, dated April 12, 1991, by and between
TLGI and Dwight Hawes(1)
*10.17 Employment Agreement, dated August 19, 1988, by and between
TLGI and Tim Hogenkamp(1)
*10.18 Employment Agreement, dated March 6, 1990, by and between TLGI
and Peter S. Hyndman(1)
*10.19 Employment Agreement, dated March 17, 1995, by and between
TLGI, LGII and Lawrence Miller(1)
*10.20 Employment Agreement, dated December 18, 1990, by and between
TLGI and Peter W. Roberts(1)
*10.21 Employment Agreement, dated March 17, 1995, by and between
TLGI and William R. Shane(1)
*10.22 Employment Agreement, dated April 27, 1993, by and between
TLGI and A.M. Bruce Watson(1)
*10.23 Employment Agreement, and Covenant Not to Compete, dated
November 14, 1990, by and between LGII and Albert S.
Lineberry, Sr.(1)
*10.24 Consulting Agreement, dated July 18, 1994, by and between TLGI
and Charles B. Loewen, LGII and Corporate Services
International Inc.(1)
*10.25 Employment Agreement, dated December 15, 1994, by and between
TLGI and Robert O. Wienke(2)
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
Exhibit No. Description
- ------------ ----------------------------------------------------------------
<S> <C> <C>
*10.26 Severance Agreement, dated June 15, 1995, by and between TLGI
and Robert Garnett(2)
*10.27 Resignation and Release Agreement, effective as of June 30,
1996, by and between TLGI, LGII and Robert O. Wienke
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
27 FINANCIAL DATA SCHEDULE
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Compensatory plan or management contract
(1) Incorporated by reference from TLGI's Annual Report on Form 10-K for the year ended
December 31, 1994, filed on March 31, 1995
(2) Incorporated by reference from TLGI's Annual Report on Form 10-K for the year ended
December 31, 1995, filed on March 28, 1996, as amended
(3) Incorporated by reference from the S-4 Registration Statement filed with LGII and TLGI
(Nos. 333-03135 and 333-03135-01) with the Commission on May 13, 1996, as amended
(4) Incorporated by reference from TLGI's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995, filed on May 11, 1995
(5) Incorporated by reference from the combined Form F-9/F-3 Registration Statements filed
by TLGI and LGII, respectively, (Nos. 33-81032 and 33-81034) with the Commission on July
1, 1994, as amended on July 11, 1994 and August 2, 1994
(6) Incorporated by reference from TLGI's Periodic Report on Form 8-K filed on April 18,
1995
</TABLE>
<PAGE> 1
EXHIBIT 3.2
SCHEDULE B
FORM 1
(SECTION 5)
COMPANY ACT
ALTERED MEMORANDUM
OF
THE LOEWEN GROUP INC.
(As altered by ordinary resolution dated May 16, 1996 increasing
the number of authorized Common Shares to 750,000,000 shares)
1. The name of the Company is "THE LOEWEN GROUP INC.".
2. The authorized capital of the Company consists of 990,000,000 shares
divided into:
(a) 750,000,000 Common shares without par value;
(b) 40,000,000 Class A shares without par value; and
(c) 200,000,000 First Preferred Shares without par value of which:
(i) 1,000,000 shares are designated as 7.75% Cumulative Redeemable
Convertible First Preferred Shares, Series A;
(ii) 425,000 shares are designated as Convertible First Preferred
Shares, Series B; and
(iii) 8,800,000 shares are designated as 6.00% Cumulative
Redeemable Convertible First Preferred Shares, Series C.
3. The shares of the Company have attached thereto the special rights and
restrictions set forth in the Articles of the Company.
<PAGE> 1
EXHIBIT 10.27
RESIGNATION AND RELEASE AGREEMENT
This Resignation and Release Agreement (hereinafter the "Agreement")
is entered into by and between Robert O. Wienke ("Employee") and The Loewen
Group Inc. ("TLG") and Loewen Group International, Inc. ("LGII") (hereinafter,
TLG and LGII shall be collectively referred to as "Loewen").
WITNESSETH
WHEREAS, Employee currently is employed by Loewen in the capacity of
Senior Vice President, Law and General Counsel and currently serves as a member
of the Board of Directors of LGII; and
WHEREAS, Employee and Loewen desire to enter into this Agreement to
resolve all matters and issues existing between them, without incurring the
costs associated with litigation; and
WHEREAS, nothing contained in this Agreement is intended in any manner
to be an admission of liability on the part of Loewen or any of its past or
present employees, officers, or directors;
NOW THEREFORE, for and in consideration of the promises and mutual
covenants and agreements hereinafter set forth, the parties intending to be
legally bound do hereby agree as follows:
1. RESIGNATION. Employee agrees to resign from his position of
Senior Vice President, Law and General Counsel of Loewen and to resign from his
membership on the Board of Directors of LGII. The effective dates of such
resignations shall be June 30, 1996. Employee will continue to receive through
June 30, 1996, all of the compensation and benefits now
1
<PAGE> 2
received by Employee.
2. CONTINUATION OF EMPLOYMENT. Loewen and Employee agree that,
notwithstanding the resignations outlined in paragraph 1, Employee will
continue in Loewen's employment until June 30, 2000, at which time his
employment will terminate. Between the effective date of the resignations
referred to in paragraph 1 and June 30, 2000, Employee shall provide and stand
ready to provide consulting, advisory, and legal services, similar to and
consistent with the nature of services provided as Senior Vice President of Law
and General Counsel, from time to time upon the request of, and at the
direction of, Loewen, on a basis not to exceed 40 hours per month at places and
times mutually convenient to Employee and Loewen. During this continuation of
employment until June 30, 2000, Employee shall be free to accept other
employment, on a temporary, part-time, or full-time basis, with entities that
do not compete with Loewen or to engage in the private practice of law
full-time or part-time. As compensation, regardless of whether Loewen requests
or directs Employee to perform any consulting, advisory, and legal services
work, Employee shall be paid at the rate of $16,666 per month, with the first
payment due on June 30, 1996 (or on the date which is two business days after
the date on which the Agreement becomes effective and enforceable under
paragraph 19, whichever date is later), and the final payment due on May 30,
2000. These monthly payments shall be subject to applicable withholding taxes.
3. DEATH OR DISABILITY OF EMPLOYEE. If Employee shall become
disabled or die before completion of the payments required pursuant to
paragraph 2 hereof, the Company will make such payments, at the time and in the
manner specified in paragraph 2, to Employee or to the benefit of the person or
person designated in writing by Employee to the Company, or if
2
<PAGE> 3
Employee fails to so designate any person or shall have revoked all such
designations, to the executors or administrators of Employee's estate.
4. RELEASE OF ALL CLAIMS. Employee, for himself, his agents,
attorneys, heirs, administrators, executors and assigns, and anyone acting or
claiming on his or their joint or several behalf, hereby releases, forever
discharges, and covenants never to sue Loewen, its employees and former
employees, officers, directors, stockholders, agents, affiliates, subsidiaries,
parent and subsidiary corporations, successors and assigns, from and on any and
all claims, causes of action, demands, damages, costs, expenses, liabilities or
other losses whatsoever that in any way arise from, grow out of or are related
to any aspect of Employee's dealings and relationship with Loewen, including but
not limited to any matter related to his employment with Loewen prior to June
30, 1996, the change in status thereof as of June 30, 1996 (as specified in
paragraph 1), and rights or claims arising under the Age Discrimination in
Employment act and the Older Workers Benefit Protection Act (42 U.S.C. Section
621 et seq.), the Employee Retirement Income Security Act (29 U.S.C.Section 301
et seq.), and any other federal, state or other governmental law, administrative
regulation, or common law doctrine.
5. RELEASE OF ALL CLAIMS. Loewen, for itself, its agents,
attorneys, parent and subsidiary corporations, successors, affiliates,
directors, officers, agents, stockholders, employees and former employees and
assigns, and anyone acting or claiming on it or their joint or several behalf,
hereby releases, forever discharges, and covenants never to sue Employee, his
agents, attorneys, heirs, administrators, executors, successors and assigns,
from and on any and all claims, causes of action, demands, damages, costs,
expenses, liabilities or other losses whatsoever that in any way arise from,
grow out of or are related to any aspect of Employee's
3
<PAGE> 4
dealings and relationship with Loewen, including but not limited to any matter
related to his employment with Loewen prior to June 30, 1996, the change in
status thereof as of June 30, 1996, (as specified in paragraph 1), and any
other federal, state or other governmental law, administrative regulation, or
common law doctrine.
6. REEMPLOYMENT OR FUTURE ASSOCIATION. Employee hereby agrees
that, after the termination of his employment in accordance with paragraph 2,
on June 30, 2000, he shall not seek reinstatement or apply for future
employment with Loewen or any of its affiliates or subsidiaries, and that
neither Loewen nor any of its affiliates shall be obligated to consider
Employee for employment.
7. CONFIDENTIALITY. Employee agrees that the existence, terms,
and conditions of this Agreement, (other than the fact that Employee is
continuing as an employee and advisor to Loewen for the term hereof) and any
and all underlying communications and negotiations in connection with or
leading to this Agreement, are confidential and that he will not disclose any
such matters to any individual or entity without the prior written consent of
Loewen; provided, however, that disclosures by Employee regarding the
existence, terms, and conditions of this Agreement may be made to Employee's
attorneys, accountants, and advisors for personal and tax purposes, and also to
the extent required by a final and binding court order or other compulsory
process. Upon Employee's receipt of any order, subpoena or other compulsory
process demanding production or disclosure of this Agreement or of any of the
terms of this agreement, Employee agrees to promptly notify Loewen in writing
of the requested disclosure, including the proposed date of the disclosure, the
reason for the requested disclosure and the identity of the individual or
entity requesting the disclosure, if possible, no later than ten
4
<PAGE> 5
business days prior to the date that such disclosure is to be made. Employee
agrees not to oppose any action that Loewen might take with respect to any such
request or demand for production or disclosure. In the event of a disclosure
by Employee in violation of the terms of this Agreement, Loewen shall have, in
addition to any claims for damages, the right to seek injunctive relief or
specific performance of this Agreement to prevent any continuing or future
breach of the confidentiality provision of this Agreement. Employee agrees
that the obligations of this paragraph shall be binding upon his agents and
representatives, including his attorneys.
8. NONDISPARAGEMENT. Employee and Loewen agree that neither
Employee nor Executive Management of Loewen shall discuss in a disparaging or
defamatory manner any aspect of Employee's employment with Loewen. Employee
agrees not to discuss with any third parties, in a disparaging or defamatory
manner, any of Loewen's employees, or any aspect of Loewen's or Employee's
business. The parties also agree that, if Loewen decides to issue a press
release regarding Employee's change in status, as stated in paragraphs 1 and 2,
such press release will take the form of that attached as Exhibit A. The
parties further agree that Loewen will provide to prospective employers seeking
references regarding Employee the reference letter attached as Exhibit B.
Finally, the parties agree that Employee, and Loewen to the extent that it so
desires, may disseminate the notice attached as Exhibit C.
9. FUTURE COOPERATION. Employee agrees to fully and completely
cooperate with Loewen with respect to any litigation that is pending against
Loewen and any claim or action that may be filed against Loewen in the future.
This cooperation shall include making himself available at reasonable times and
places for interviews, reviewing documents, testifying in a deposition or a
legal proceeding, and providing advice to Loewen in preparing defenses to any
pending or
5
<PAGE> 6
potential future claims against Loewen.
10. INDEMNITY. Loewen agrees to advance the cost of defense
against and, to the extent allowed by Delaware law, to indemnify Employee and
hold him harmless against any reasonable costs, reasonable expenses including
attorneys' fees, judgments, or damages incurred by Employee in respect of any
suit or action brought against Employee or Loewen or any affiliate by virtue of
Employee's position as having been an Officer or Director of Loewen including
but not limited to (i) any shareholder class action suits or shareholder
derivative actions or suits, or (ii) other actions or suits against Loewen or
Employee in which Employee is additionally joined or threatened to be joined as
a Defendant by virtue of Employee's position as having been an Officer or
Director of Loewen or (iii) any action or suit by any third party in which
Employee may be a witness or potential witness. Pursuant to and as part of
this indemnity, Loewen will use its active and good faith efforts to cause
Employee to enjoy coverage under Loewen's Directors' and Officers' Liability
Insurance or Executive Protection Policy, and participate in all rights of
indemnity or advance of expenses made available to Officers or Directors of
Loewen.
This indemnity will not extend to include (i) any action or inaction
by Employee of which Loewen was unaware and which constitutes willful
misconduct by Employee or which, if Loewen was aware of such willful
misconduct, the same had not been approved by Loewen; (ii) any action or
inaction by Employee occurring outside of the dates of his employment with
Loewen; and (iii) any indemnification not permitted by Delaware law.
11. MEDICAL BENEFITS. Loewen agrees that, during Employee's
employment with Loewen as provided in paragraph 2, it shall provide Employee
and his family with full medical insurance
6
<PAGE> 7
benefit coverage based upon Employee's most recent election of coverage prior
to the execution of the Agreement. Loewen will provide such medical insurance
benefit coverage to Employee at the same cost that Employee incurred prior to
execution of the Agreement. The medical insurance benefit coverage shall
continue until (i) Employee has commenced full-time employment with another
party who will provide Employee with comparable and similar medical coverage
for himself and his family at comparable cost and (ii) any "pre-existing
conditions" exceptions to such new medical coverage for cancer or other
conditions have been eliminated. The parties understand that any such new
employment that would otherwise be considered "full-time" shall not be
considered less than "full-time" simply because of Employee's ongoing
responsibilities to provide Loewen with consulting, advisory, and legal
services pursuant to this Agreement.
12. REIMBURSEMENT FOR RELOCATION EXPENSES. Loewen will reimburse
Employee in the amount of $136,000 for real estate brokerage costs incurred by
Employee in connection with his move to Cincinnati. This payment will be made
on or before July 9, 1996, provided that the Agreement has become effective
and enforceable under paragraph 19; otherwise, the payment will be made within
two business days of the date the Agreement does become effective and
enforceable under paragraph 19.
13. FORGIVENESS OF LOAN. Loewen hereby forgives, releases and
discharges any and all Employee's obligations under a certain $25,000 unsecured
demand promissory note that Employee provided to Loewen in connection with a
loan to cover Employee's relocation costs associated with his move to
Cincinnati.
14. REIMBURSEMENT FOR INTEREST PAYMENT. Loewen will reimburse Employee in
the
7
<PAGE> 8
amount of $16,000 for interest on indebtedness incurred by Employee in
connection with his relocation to Cincinnati. This payment will be made on or
before July 9, 1996, provided that the Agreement has become effective and
enforceable under paragraph 19; otherwise, the payment will be made within two
business days of the date the Agreement does become effective and enforceable
under paragraph 19.
15. OUTPLACEMENT SERVICES. Loewen will pay for the following
outplacement services from April 1, 1996 through September 30, 1996 upon
presentation of bills by Employee:
a. Secretarial services provided by an outside entity,
including telephone, postage, etc., up to $2,000 per month.
b. Consultant: Roy Gillespie up to $1,000 per month.
c. Office expenses provided by an outside entity, up to
$1,000 per month.
d. Additional expenses for additional employment
consultants, employment and legal seminars including travel expenses to said
seminars up to $2,000 per month. Any shortfall below the above monthly limits
for each category will be added on a cumulative basis to subsequent months'
limits for the corresponding categories. In addition, Loewen will provide
Employee voice mail facilities in its Covington, KY headquarters during the
term of his employment as specified in paragraph 2.
16. STOCK OPTIONS. Employee's Option Agreement with TLG,
dated December 13, 1994, shall continue in full force and effect, and the
Options, as defined in the Option Agreement, shall continue to be exercisable
by Employee, on the schedule set forth in the Option Agreement; provided,
however, Employee and Loewen further hereby agree, and the Option Agreement is
hereby amended to reflect, that the Option Agreement shall terminate 45 days
after
8
<PAGE> 9
June 30, 2000.
17. MEIPs. Employee's Investment Option Agreement, dated June 15,
1994, shall continue in full force and effect, and accordingly on June 15,
1996, an additional 21,000 units shall vest to Employee's benefit, resulting in
a total of 42,000 units vested to Employee's benefit as of June 15, 1996, of
participation in the TLG 1994 Management Equity Investment Plan provided,
however, Employee and Loewen further hereby agree, and the Investment Option
Agreement is hereby amended to reflect, that no additional units of
participation in the Management Equity Investment Plan shall vest after June
30, 1996.
18. GOOD FAITH AND NONCOMPETITION OBLIGATION. In the course of
his duties pursuant to this Agreement, Employee agrees to do all reasonable
things to promote and foster the best interests and good will of Loewen and its
business. At no time during the term of this Agreement shall Employee,
directly or indirectly, engage in any business activity that competes with
Loewen or its current business. Both parties reciprocally agree that an
express obligation and duty of good faith shall apply to each party as to all
aspects of this Agreement.
19. ACKNOWLEDGMENT. Employee acknowledges receipt of the original
of this agreement on June 28, 1996. Employee acknowledges and agrees that the
Agreement provides him with compensation and other benefits to which he
otherwise would not be entitled. Employee further acknowledges and understands
that he shall have a period of 21 days from the date on which he received the
Agreement to consider and decide whether to accept and sign the Agreement. He
further acknowledges and understands that, while it is his right to accept and
sign the Agreement during the 21 day period, he is under no obligation to do
so. Should Employee decide to accept and sign the Agreement, (a) he shall have
the right to revoke the
9
<PAGE> 10
agreement within seven days following the date on which he signed it and (b)
the Agreement shall not become effective or enforceable until such seven day
period has expired without revocation.
20. NO ADMISSION OF LIABILITY. The parties hereby acknowledge and
agree that neither Loewen nor its officers, agents, or employees, by providing
the financial and other consideration described above and by entering into this
Agreement, has admitted to any unlawful conduct or liability to Employee.
21. VOLUNTARY EXECUTION. Employee hereby acknowledges that he is
executing this Agreement voluntarily and of his own free will and that he fully
understands the terms of this Agreement. Employee acknowledges that he has
reviewed this Agreement fully and discussed its terms with his Legal counsel
prior to its execution.
22. CONTROLLING LAW. This Agreement shall be construed under and
governed by the laws of Kentucky.
23. NO ASSIGNMENT OF CLAIMS. Employee hereby represents and
warrants that he has not previously assigned or purported to assign or transfer
to any person or entity any of the claims or causes of action herein released.
24. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between Employee and Loewen with respect to the subject matter of
this Agreement, and there are no other written or oral agreements,
understandings, or arrangements except as set forth herein. The terms of this
agreement may not be modified or waived except in writing signed by the parties
hereto. The invalidation of any provision contained in this Agreement shall
not affect the validity of any other provision.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
in counterpart originals or otherwise, in the presence of competent witnesses
as of the dates set forth below.
THE LOEWEN GROUP, INC.
By: /s/ Timothy R. Hogenkamp
------------------------------
/s/ Stephanie Tuerck Its: Timothy R. Hogenkamp
- --------------------------- ------------------------------
Witness
Date: July 8, 1996 Date: July 8, 1996
--------------------- ------------------------------
THE LOEWEN GROUP INTERNATIONAL, INC.
By: /s/ Timothy R. Hogenkamp
------------------------------
/s/ Stephanie Tuerck Its: Timothy R. Hogenkamp
- --------------------------- ------------------------------
Witness
Date: July 17, 1996 Date: July 17, 1996
-------------------- ------------------------------
/s/ Stephanie Tuerck ROBERT O. WIENKE
- --------------------------
Witness /s/ Robert O. Wienke
------------------------------------
Date: June 28, 1996 Date: June 28, 1996
-------------------- ------------------------------
11
<PAGE> 1
EXHIBIT 11
THE LOEWEN GROUP INC.
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic
Net earnings.............................. $19,489 $12,340 $36,712 $26,397
Undeclared cumulative preferred share
dividends.............................. (2,049) -- (4,023) --
------- ------- ------- -------
Net earnings available to Common
shareholders........................... 17,440 12,340 32,689 26,397
Weighted average shares outstanding....... 58,687 43,977 54,445 42,544
Basic earnings per share.................. $ 0.30 $ 0.28 $ 0.60 $ 0.62
------- ------- ------- -------
Fully diluted
Net earnings available to Common
shareholders........................... $17,440 $12,340 $32,689 $26,397
Add: imputed earnings from dilutive
options, net of tax effect............. 139 667 291 1,249
------- ------- ------- -------
Fully diluted net earnings................ $17,579 $13,007 $32,980 $27,646
Weighted average shares outstanding....... 58,687 43,977 54,445 42,544
Shares issuable upon assumed conversion of
dilutive options....................... 731 2,297 755 2,339
------- ------- ------- -------
Fully diluted shares...................... 59,418 46,274 55,200 44,883
------- ------- ------- -------
Fully diluted earnings per share.......... $ 0.30 $ 0.28 $ 0.60 $ 0.62
------- ------- ------- -------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS CERTAIN SUMMARY INFORMATION THAT IS DERIVED FROM THE
LOEWEN GROUP INC. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED JUNE 30, 1996, INCLUDED HEREIN AND IS QUALIFIED BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 36,521
<SECURITIES> 0
<RECEIVABLES> 178,156
<ALLOWANCES> 19,810
<INVENTORY> 30,927
<CURRENT-ASSETS> 236,405
<PP&E> 728,680
<DEPRECIATION> 92,708
<TOTAL-ASSETS> 2,919,639
<CURRENT-LIABILITIES> 162,192
<BONDS> 1,027,334
75,000
0
<COMMON> 790,451
<OTHER-SE> 78,371
<TOTAL-LIABILITY-AND-EQUITY> 2,919,639
<SALES> 416,240
<TOTAL-REVENUES> 416,240
<CGS> 262,143
<TOTAL-COSTS> 262,143
<OTHER-EXPENSES> 58,561
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,546
<INCOME-PRETAX> 52,446
<INCOME-TAX> 15,734
<INCOME-CONTINUING> 36,712
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,712
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.60
</TABLE>
